I’m not totally sure what I think the correct market behavior based on knowable information was, but it seems very hard to make the case that a large crash on Feb 20th is evidence of the markets moving “in tandem with rational expectations”.
“ A couple weeks ago, I started investigating the response, here and in the stock market, to COVID-19. I found that LessWrong’s conversation took off about a week after the stock market started to crash. Given what we knew about COVID-19 prior to Feb. 20th, when the market first started to decline, I felt that the stock market’s reaction was delayed. And of course, there’d been plenty of criticism of the response of experts and governments. But I was playing catch-up. I certainly was not screaming about COVID-19 until well after that time.
Today, I found the most detailed timeline I’ve seen of confirmed cases around the world. It goes day by day and country by country, from Jan. 13th to the end of March.
That timeline shows that Feb. 21st was the first date when at least 3 countries besides China had 10+ new confirmed cases in a single day (Japan, South Korea, Italy, and Iran).
That changes my interpretation of the stock market crash dramatically. Investors weren’t failing to synthesize the early information or waiting for someone to yell “fire!” They were waiting to see confirmed international community spread, rather than just a few cases popping up here and there. Once they saw that early evidence, the sell-off began, and it continued in tandem, day by day, with the evidence of community spread in new countries and the exponential growth of COVID-19 cases in countries where it was already established.”
I’m not totally sure what I think the correct market behavior based on knowable information was, but it seems very hard to make the case that a large crash on Feb 20th is evidence of the markets moving “in tandem with rational expectations”.
Here’s what I wrote in April 2020 on that topic:
“ A couple weeks ago, I started investigating the response, here and in the stock market, to COVID-19. I found that LessWrong’s conversation took off about a week after the stock market started to crash. Given what we knew about COVID-19 prior to Feb. 20th, when the market first started to decline, I felt that the stock market’s reaction was delayed. And of course, there’d been plenty of criticism of the response of experts and governments. But I was playing catch-up. I certainly was not screaming about COVID-19 until well after that time.
Today, I found the most detailed timeline I’ve seen of confirmed cases around the world. It goes day by day and country by country, from Jan. 13th to the end of March.
That timeline shows that Feb. 21st was the first date when at least 3 countries besides China had 10+ new confirmed cases in a single day (Japan, South Korea, Italy, and Iran).
That changes my interpretation of the stock market crash dramatically. Investors weren’t failing to synthesize the early information or waiting for someone to yell “fire!” They were waiting to see confirmed international community spread, rather than just a few cases popping up here and there. Once they saw that early evidence, the sell-off began, and it continued in tandem, day by day, with the evidence of community spread in new countries and the exponential growth of COVID-19 cases in countries where it was already established.”
https://www.lesswrong.com/posts/EdJD3v2uxLrL3pA75/my-stumble-on-covid-19