News and Markets in the Time of COVID-19

The initial phase of the COVID-19 pandemic was characterized by voluminous, highly negative news coverage. Markets overreacted to uninformative news, and reacted more to news during high volatility periods. News coverage responded to lagged market activity, and causally impacted contemporaneous returns. The early part of the pandemic was characterized by pronounced feedback between news and markets. I propose a structural break test to identify the presence and end of such feedback episodes. This one ended in March 2020, which was knowable by the end of April. Strikingly, after the structural break, markets and news became considerably less coupled.