The outbreak of the novel coronavirus (COVID-19) will go down in history as a major example of a neglected risk. The topic “infectious diseases” was ranked tenth in terms of impact in the World Economic Forum’s Global Risk Report 2020 (WEF 2020, published on 15 January 2020), but was considered quite unlikely. The attention of corporate decision makers and politicians was mainly focused on traditional sources of business risk and pressing environmental issues. Only a few weeks later, however, their attention shifted dramatically.

According to the World Health Organization (WHO), by 10 March 2020, COVID-19 had led to more than 110,000 confirmed infections and 4,015 deaths in 110 countries – and the numbers are increasing rapidly. Huge disruptions to personal lives are taking place, including curfews (or situations resembling curfews) for a great many individuals. Beyond the immediate tragedies of death and disease, indirect effects through fear are taking hold of an uncountable number of people around the world.

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Concluding remarks
Overall, our study illustrates how markets are adjusting to the rapid emergence of a previously neglected risk. These early results suggest that the market fairly quickly began to respond to concerns about the possible economic consequences of the novel coronavirus. The reaction happened initially in quite an orderly fashion, focusing on international trade. In the most recent period (late February and early March), large price moves of the aggregate market occurred. But behind these feverish price moves, some patterns emerge. In particular, the cross-section of stocks reveals that investors started to become concerned about potential amplifications of the COVID-19 shock through financial channels

Our work looks at stock price effects, which capture the expectations of market participants regarding future economic consequences. Other research should examine the realised consequences of the novel coronavirus. The combination of this research will inform policymakers, investors, and businesses in their responses to the emergency (and hopefully help prepare for future emergencies).