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Pandemic resilience and stock returns: asset pricing during the Covid-19 using the Fama French models

Cerkauskas, Tautvydas LU and Wei, Shanshan LU (2021) NEKN02 20211
Department of Economics
Abstract
The year of 2020 was marked with an unprecedented outbreak of Covid-19 virus and a global pandemic. Not all businesses across various industries have been equally affected. This thesis investigated the difference in return of industries with dissimilar exposure to the Covid-19 pandemic under the lockdown and social distance intervention, and how this difference has evolved during 2020. We found evidence supporting the expectation that highly resilient companies were rewarded with lower value losses as compared to the least resilient companies. After adjusting returns for the Fama and French 3 and 5 factor models and exploring different setup options, we concluded that a positive cumulative return differential was recorded but limited to... (More)
The year of 2020 was marked with an unprecedented outbreak of Covid-19 virus and a global pandemic. Not all businesses across various industries have been equally affected. This thesis investigated the difference in return of industries with dissimilar exposure to the Covid-19 pandemic under the lockdown and social distance intervention, and how this difference has evolved during 2020. We found evidence supporting the expectation that highly resilient companies were rewarded with lower value losses as compared to the least resilient companies. After adjusting returns for the Fama and French 3 and 5 factor models and exploring different setup options, we concluded that a positive cumulative return differential was recorded but limited to the period of end Q1 and start Q2 2020 and decreased into negative values when the US stock market recovered. In addition, we observed that the estimate of pandemic resilience effects highly depended on methodological choices such as time period of historical input data and alternative approaches to separate companies into highly and least affected by the social distancing requirements. (Less)
Please use this url to cite or link to this publication:
author
Cerkauskas, Tautvydas LU and Wei, Shanshan LU
supervisor
organization
course
NEKN02 20211
year
type
H1 - Master's Degree (One Year)
subject
keywords
Covid-19, Stock Returns, Asset Pricing, Resilience
language
English
id
9051717
date added to LUP
2021-10-26 08:16:21
date last changed
2021-10-26 08:16:21
@misc{9051717,
  abstract     = {{The year of 2020 was marked with an unprecedented outbreak of Covid-19 virus and a global pandemic. Not all businesses across various industries have been equally affected. This thesis investigated the difference in return of industries with dissimilar exposure to the Covid-19 pandemic under the lockdown and social distance intervention, and how this difference has evolved during 2020. We found evidence supporting the expectation that highly resilient companies were rewarded with lower value losses as compared to the least resilient companies. After adjusting returns for the Fama and French 3 and 5 factor models and exploring different setup options, we concluded that a positive cumulative return differential was recorded but limited to the period of end Q1 and start Q2 2020 and decreased into negative values when the US stock market recovered. In addition, we observed that the estimate of pandemic resilience effects highly depended on methodological choices such as time period of historical input data and alternative approaches to separate companies into highly and least affected by the social distancing requirements.}},
  author       = {{Cerkauskas, Tautvydas and Wei, Shanshan}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Pandemic resilience and stock returns: asset pricing during the Covid-19 using the Fama French models}},
  year         = {{2021}},
}