H7N9 not only endanger human health but also hit stock marketing

Jiang, Yan; Zhang, Yi; Ma, Chunna; Wang, Quanyi; Xu, Chao; Donovan, Connor; Ali, Gholam; Xu, Tan; Sun, Wenjie

In disaster economics, there is a "damage created demand" theory known as the Broken Windows fallacy [21] . Using this theory are a basis for our conclusions, we predict that an outbreak of human avian influenza A(H7N9) in China must necessarily lead to increased stock market demand for related industries such as biomedicine, biological products and Chinese traditional medicine. As such, we would also expect that related sector indices would increase because of the demand and due to the overall investment psychology of domestic Chinese investors. However, our results showed that the sector indices for biomedicine, biological products and Chinese traditional medicine actually decreased with the increasing number of daily reported cases. One plausible explanation is that even though H7N9 is still being reported, investors recognize that the outbreak does not have the potential to create an international pandemic that would warrant a significant increase in biomedical expenditure. They are also less likely to be aware of the outbreak or give it much attention because the scale of infection is nowhere near that seen with pdm A (H1N1) in 2009. As such, total change in demand for stocks in these indexes remains small with net effects on prices due to a H7N9 outbreak also expected to be small.