Yale SOM Finance Faculty on Covid-19

Over the last few months, the Yale SOM finance faculty have commented on a number of Covid-19 related topics and have used their research to further contribute to pressing topics such as: unemployment insurance claims, the stock market, the economy, and federal interventions.

Below is a collection of some of their recent work and comments on Covid-19 and the economy. For more, visit the ICF News archives.

RECORD UNEMPLOYMENT INSURANCE CLAIMS

Since the beginning of the Covid-19 pandemic, Professor Paul Goldsmith-Pinkham has been working with co-authors Aaron Sojourner and Elizabeth Pancotti to predict weekly unemployment insurance claims. Based on a model they built using Google trends, they have come incredibly close each week! Read more about their impressive research and press coverage.

Paul Goldsmith-Pinkham:

• "Here comes another bad jobless claims number," Politico

• "Jobless Claims Hit 3.3 Million in the Last Report. This Week's Will Probably Be Worse." The New York Times

• “Making Sense of A Record-Breaking Wave of Unemployment Claims,” Yale Insights

THE STOCK MARKET AND THE ECONOMY

In March, the stock market fell dramatically. The subsequent months provided unpredictability in the market’s volatility and uncertain path to recovery. Market predictability became challenging because of several unknown factors including investor anxiety, the toll of the tanking market on retirement savings, rising unemployment numbers, and the time it will take to create a vaccine for the Covid-19 virus.

James Choi

• “What the Plunge in the Stock Market Means for Individual Investors,” Yale Insights

William Goetzmann & Robert Shiller

• "The two pandemics," Project Syndicate

Robert Shiller

• “Why We Can’t Foresee the Pandemic’s Long-Term Effects,” New York Times

• “What Is The Stock Market Trying To Tell Us?” NPR Planet Money

Tobias J. Moskowitz

• "The Side Effects of Social Distancing," Freakonomics

Stefano Giglio

• “Inside the Mind of a stock Market Crash” WORKING PAPER
  
  Abstract: We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic, as well as during the subsequent partial stock market recovery. Read more.

THE FUTURE OF REAL ESTATE

Throughout the pandemic, many Americans have worried about being able to make their rent and mortgage payments during a time of economic hardship and uncertainty. This also prompted people to wonder what will happen to the real estate market post-Covid-19? Will people move away from densely populated cities and into the suburbs as working from home might become the new norm?

Matthew Spiegel:

• "Homeowners get 90-day pass on mortgage bills. Renters still owe rent." The CT Mirror 

• “Lamont signs COVID-19 residential rent protections,” Yale Daily News

Robert Shiller:

• “Are Home Buyers Heading to the Suburbs?” Barron’s Streetwise (podcast)

• “The Cold War and the Rush for Suburban Homes,” Bloomberg (podcast)

PUTTING THINGS INTO HISTORICAL PERSPECTIVE

If the saying, “history repeats itself,” is true, then financial history could give some sort of insight into the Covid-19 stock market volatility we are experiencing today. Although there are currently many unknown variables, similar situations such as the 1918 Spanish Flu Pandemic and South Sea Bubble of 1720 provide insight into how investors reacted to an economic downturn and how the market recovered. Behavioral economics and behavioral finance also play a role here in examining investor behavior after crashes.

William Goetzmann:

• "Pandemic Panic: The Stock Market Reaction to Covid-19" MetroFocus

• "We Can't Prevent Market Panics. We Can Control How We React." The Wall Street Journal

• “Crashes and COVID-19 in Historical Context,” Yale Insights

FEDERAL INTERVENTIONS

During the pandemic, it became clear that the federal government needed to intervene and find ways to help save the economy. The federal government worked to provide stimulus packages to the American people while the Federal Reserve rolled out a “Main Street” loan program to help keep businesses afloat.

William English:

• “Former Fed economists recommend widening scope of $600 billion Main Street Lending Program,” Business Insider

• "The Fed enters a risky new world with 'Main Street' loan program," AP News

• “Faculty Viewpoints: The Economic Policy Response,” Yale Insights

Andrew Metrick:

• "The big problem coronavirus poses for White House economists," CNN

• "Stimulus May Be Too Late For Many After 50,000 Stores Close," The Washington Post

• “Faculty Viewpoints: Preventing a Financial Crisis,” Yale Insights

KILLER ACQUISTIONS

Professor Song Ma and his co-authors have defined the term “killer acquisitions” to mean the act of companies acquiring competitors with the sole purpose of  shutting them down. These companies want to  swiftly end competitor innovation which would threaten their control over the market. During the Covid-19 crisis, examples of “killer acquisitions” came to light when there was high demand for ventilators and major difficulty obtaining them.

Song Ma

• “When Corporate Acquisitions Affect Health Care,” Yale Insights

• "Unsanitized: Covidien's Story Is Corporate America's Story," The American Prospect

• "Pandemic opens curtains on next economic model," Asia Times

SPORTING EVENTS

The implications of suspending live sporting events and restricting crowds will have an impact on the economy as well as on the sport itself. Sporting events are a major source of entertainment and revenue worldwide but with the possibility of playing in front of empty stands, Professor Tobias Moskowitz has found that referees may actually make fairer calls.

Tobias J. Moskowitz

• “No Fans Allowed? How home-field advantage could be affected in NFL season without full stadiums,” CBS Sports

• “As we consider a future without fans in the stands, what does that mean for athletes?” Boston Globe

• "Bundesliga is back but will home field advantage now mean nothing?" Irish Mirror

• "The Big Winners of Sports Without Fans: The Refs," The Wall Street Journal

TEACHING REMOTELY

The Yale finance faculty had to suddenly adapt to online teaching and acted quickly to learn how to effectively use Zoom for everyday teaching. At the end of the semester, faculty then reflected upon what worked and what can be improved for future online teaching.

Nicholas Barberis

• "From Chalkboard to Zoom Rooms: Teaching During Covid-19" Yale University

Paul Goldsmith-Pinkham

• "Faculty Describe Challenges and Lessons Learned in the Virtual Classroom" Yale School of Management