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Ronfar's avatar

As the 1918 flu coincided with World War 1, it would be nearly impossible to separate the economic effects of the two of them.

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Overcoming Bias Commenter's avatar

Looks like a nice paper, and fits in with some papers I have read that claim stock market price fluctuations have alpha's around 3.

However, plenty of natural disasters (and human wars) have mortality alphas between 1 and 2, the domain where the average is undefined and very big disasters are fairly common. There the important question is whether there exist cut-offs (likely for landslides and flooding due to geography, but not guaranteed for epidemics or wars).

Together, this seems to suggest that while endogenous downturns and crashes occur, they are relatively unlikely to crash the market completely. But it might be exogenous disturbances that we should watch out for, both in terms of mortality and in their market impact.

Still, the 1918 flu did not seem to have had a very noticeable economic effect - if extremes like that doesn't show up in the data, maybe the economy is much more resilient than we normally tend to think?

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