Research Highlights

What’s the Value of a Covid Cure? New Research from NYU Stern Professor Viral Acharya Finds an Answer

Viral Acharya

The value of a cure rises substantially when there is uncertainty about the frequency and duration of pandemics.

We know the economic costs of Covid-19. But how much is a cure worth? NYU Stern Professor and former Reserve Bank of India Deputy Governor Viral Acharya, along with co-authors Timothy Johnson, Suresh Sundaresan and Steven Zheng, finds an answer to this question in his latest research.

In the paper, titled, “The Value of a Cure: An Asset Pricing Perspective” the co-authors use stock market data and a vaccine progress indicator to calculate the value of a cure, i.e., the amount of wealth that someone would be willing to pay for obtaining a vaccine that puts an end to the ongoing pandemic, finding that a cure is worth 5-15% of total wealth. Additional findings from the paper include:
  • The value of a cure rises substantially when there is uncertainty about the frequency and duration of pandemics
  • Using both the news and the full chronology of vaccine clinical trial progress, the researchers constructed a novel vaccine progress indicator which shows expected time to deployment of the cure. A decrease in expected time to deployment by a year improved stock returns by 4-7% on a daily return basis
  • The policy implications of these findings suggest that resolving uncertainty has almost as much value as the cure itself
“While there are several estimations of how costly the pandemic is to the economy, our approach is different and novel in that it uses stock market data to calculate the value of a cure and indirectly provides an estimate of the pandemic’s economic cost,” write the co-authors. They further discuss the impact of their findings on potential future pandemics: “An important policy implication that can be drawn is that understanding the fundamental biological and social determinants of future pandemics, for instance, whether pandemics are related to zoonotic diseases triggered more frequently by climate change, may be as important to mitigating their economic impact as resolving the immediate pandemic-induced crisis.”