Quotation Halling, Michael, Pagano, Marco, Zechner, Josef. 2020. Disaster Resilience and Asset Prices. Research Seminar, ESSEC Business School, 10.10.20


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Abstract

This paper investigates whether security markets price the effect of social distancing on firms’ operations. We document that firms that are more resilient to social distancing significantly outperformed those with lower resilience during the COVID-19 outbreak, even after controlling for the standard risk factors. Similar cross-sectional return differentials already emerged before the COVID-19 crisis: the 2014-19 cumulative return differential between more and less resilient firms is of similar size as during the outbreak, suggesting growing awareness of pandemic risk well in advance of its materialization. Finally, we use stock option prices to infer the market’s return expectations after the onset of the pandemic: even at a two-year horizon, stocks of more pandemic-resilient firms are expected to yield significantly lower returns than less resilient ones, reflecting their lower exposure to disaster risk. Hence, going forward, markets appear to price exposure to a new risk factor, namely, pandemic risk.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Unpublished lecture
Language English
Title Disaster Resilience and Asset Prices
Event Research Seminar
Location ESSEC Business School
Event country France
Date Oct. 10, 2020
JEL G01, G11, G12, G13, G14, Q51, Q54

Associations

People
Zechner, Josef (Details)
External
Halling, Michael (University of Luxembourg, Luxembourg)
Pagano, Marco (University of Naples Federico II, Italy)
Organization
Institute for Finance, Banking and Insurance IN (Details)
Research Institute for Capital Markets FI (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5305 Bank management (Details)
5307 Business and management economics (Details)
5358 Corporate finances (Details)
5361 Financial management (Details)
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