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Advances in Social Sciences Research Journal – Vol.7, No.7

Publication Date: July 25, 2020

DOI:10.14738/assrj.77.8731.

Olds, C. (2020). Infectious Diseases, Stock Market Volatility, and Public Opinion on Home Buying in the United States: Implications from

COVID-19 and Beyond. Advances in Social Sciences Research Journal, 7(7) 859-871.

Infectious Diseases, Stock Market Volatility, and Public Opinion on

Home Buying in the United States: Implications from COVID-19 and

Beyond

Christopher Olds

Department of Political Science,

Fort Hays State University, United States;

ABSTRACT

The study evaluates whether there are limits to an excess in

consumptive behaviors during periods where infectious disease

outbreaks produce unpredictable changes in equity markets. While

there is evidence of panic buying in these periods such that people

increasingly acquire goods that they do not actually need, this does not

mean that people will acquire items if their purchase has significant risk

tied to them. Using time series information across 35 years, the

empirical analyses show that people are less likely to think buying a

home is a good idea due to change in the level of equity market volatility

brought about by infectious diseases. Even though panic buying occurs

during epidemics and pandemics, this is not an indication that decision- making about purchases is wholly irrational. In uncertain times when

infectious disease outbreaks make equity markets unpredictable,

people rationally seek to minimize the level of personal losses they

experience as much as possible.

Keywords: Infectious Diseases, Panic Buying, Home Buying, Equity Markets,

Epidemics, Pandemics, COVID-19, Uncertainty, Risk, Public Opinion,

Interdisciplinary Social Science.

INTRODUCTION

A significant amount of discussion following the arrival of the COVID-19 pandemic involves panic

buying behavior [1]. Panic buying occurs when people perceive a limited supply of goods is on the

horizon (a supply disruption), so they will accumulate extra units of goods for potential

consumption into the extended future [2]. An increase in consumer panic buying increases the level

of demand for products perceived to be essential for survival; the demand is so high that it is difficult

for businesses selling goods to satisfy consumption levels [3]. If individuals perceive an interruption

in the supply chain of goods is going to occur, they will engage in more buying to avoid feeling

insecure and unsure of when goods will be available again [4]. When people feel insecure about

their safety, they feel compelled to acquire goods and hoard them under the belief this increases the

likelihood of survival [5]. The acquisition of goods instills a sense in people that they have more

control over their security [6]. There is then significant historical evidence of a surge in panic- induced buying of products in epidemic and pandemic periods [7]. Does all of this suggest that

individuals equate the acquisition of all things associated with safety as necessary during pandemic

periods?

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URL: http://dx.doi.org/10.14738/assrj.77.8731 860

Olds, C. (2020). Infectious Diseases, Stock Market Volatility, and Public Opinion on Home Buying in the United States: Implications from COVID-19 and

Beyond. Advances in Social Sciences Research Journal, 7(7) 859-871.

Communication Partner On Uptake Of Voluntary Medical Male Circumcision Among Married Men In Kenya: An Evaluation Study Of Information Source

Attributes Using information collected from January 1985 to May 2020, the current study evaluates whether . Advances in Social Sciences Research Journal, 7(7) 825-842.

periods where there are infectious disease outbreaks that bring about volatility in equity markets

are points in time where people express more skepticism that purchasing a home is a good idea.

Evaluating this is necessary to evaluate the boundaries of consumptive behavior. While people are

more likely to acquire items they do not need during epidemics or pandemics, this in and of itself

does not mean people are entirely irrational in their reasoning about purchases. For those

purchases where there is significant risk involved (e.g. home buying), people can exhibit rational

decision-making behavior and express reluctance in making these kinds of purchases.

LITERATURE REVIEW

With infectious disease outbreaks, we see an increase in the level of posttraumatic symptoms like

severe anxiety, instability, guilt, hostility, and loneliness, such that there are deleterious effects on

mental health during these periods [8]. When infectious diseases spread, people are torn between

their wish to preserve their regular routines and the uncertainty over how long it will be before

they can return to these routines [9]. A potential means to cope with this conflict is to acquire as

many goods as possible to produce the sense that one has regained control over their safety and

security in uncertain times. When facing a crisis situation like an epidemic or a pandemic, people

are going to adopt behaviors perceived as necessary for survival, even if those behaviors might be

primitive instinctual behaviors that are not rooted in a rational decision calculus [10]. Research in

survival psychology says people will exhibit changes in their behavior following outbreaks or

natural disasters [11]. One of these behavioral changes is panic buying, whereby people purchase a

significant amount of goods before, during, and after one of these perceivably threatening events

happen [12].

Panic buying then is a response during epidemics and pandemics that is rooted in fears of

threatened survival [13]. There are various stimuli or information cues people can be exposed to

where these fears can be activated. For example, the proliferation of social media where people can

express their fears and write about their response to those fears for others to see can create almost

a contagious conformity, such that people feel the need to respond to events in a similar way as

others have [14]. Traditional mass media outlets can also influence panic buying levels; stories that

others are buying and depleting the level of available goods will lead people to emulate this behavior

if they believe it will increase their chances of survival [15].

The response of government to an event can create a lack of faith that government will be able to

provide proper assistance if resources are depleted. People decide it is best to take matters into

their own hands and acquire as many goods as possible because there is no confidence that

government actors will be able to help in a timely basis [16].

Regardless of the specific cause that results in panic buying, it is quickly apparent that this is a type

of herd behavior where many people simultaneously are trying to acquire goods (food, beverages,

toiletries, medical products, etc.) that deplete the available stock, resulting in those who have a

genuine day-to-day need for these products to not have a means of acquiring them [17]. Avoiding

supply disruptions during infectious disease outbreaks thus becomes a major priority but

preventing them is hard to avoid with persistent panic buying. Persistent panic buying is a

consequence of the negative psychological symptoms experienced during infectious disease

outbreaks. There will be many instances of negative psychological symptoms exhibited in

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Advances in Social Sciences Research Journal (ASSRJ) Vol.7, Issue 7, July-2020

individuals that did not previously have mental health conditions, as well as the worsening of

negative psychological symptoms for those that have already been diagnosed with a mental illness

[18]. While negative psychological symptoms lead people to engage in panic buying behavior that

is often more instinctual than a careful and calculated evaluation of benefits relative to costs, we

have to consider whether consumption decisions during times of infectious disease outbreaks are

consistently devoid of an analysis of benefits relative to costs.

Epidemics and pandemics are periods of high uncertainty. Usually when individuals face

uncertainty in their contextual circumstances they will seek to minimize the potential losses as

much as possible [19]. Attempting to reduce perceived risk will be the expected reaction from a

public lacking confidence in the current and foreseeable composition of the economy. When tasked

with deciding under conditions of uncertainty, people will attempt to determine how desirable

possible outcomes are in conjunction with how likely those outcomes are to occur [20]. If there is

high uncertainty about the existing economic climate and future economic prospects, people will

express reticence to take actions that are of significant risk.

An example of such an action is the purchase of a home. Periods where infectious disease outbreaks

occur can create interruptions in employment, as has been seen during the COVID-19 pandemic

with stay-at-home orders and closures of specific sectors of business to mitigate the spread of

infections. Aspects such as these reduce the level of labor available to conduct normal business,

which produces sharp declines in the production and output of goods and services, exacerbating

already present concerns about disruptions to the supply chain that help to increase the amount of

uncertainty about economic conditions [21].

With interruptions in employment there will also be uncertainty regarding earnings, a variable

which has been found to be a significant determinant of whether home ownership will occur [22].

If infectious disease outbreaks spawn social distancing guidelines, this can reduce the ability of real

estate agents to offer viewings of properties. Physically being able to see/tour prospective homes is

deemed a crucial part of the real estate selling process [23]. If prospective home buyers cannot even

physically see homes available on the market in-person and must rely on digital tours over tools

like Facetime or Zoom, there will be uncertainty that any home viewed is a suitable or proper fit for

the needs and/or preferences of buyers. Buying a home is a resource-intensive process outside of

periods where there are infectious disease outbreaks [24]; the presence of an epidemic or pandemic

might only exacerbate the amount of time, effort, and money expended in searching for a home to

acquire.

The considerations mentioned in the prior paragraph make the potential risks involved in home

buying during infectious disease outbreak periods markedly higher than purchasing an excessive

number of toilet paper rolls and containers of liquid hand soap. Prospective home buyers will be

particularly skittish at taking on a mortgage if infectious disease outbreaks increase equity market

volatility; higher equity market volatility leads people to believe the current and prospective

economic climate is unclear [25]. With a lack of clarity about the economic context for the

foreseeable future due to infectious disease outbreaks that result in equity market volatility, people

will come to the judgment that conditions are not ideal to buy a home.