Disaster resilience and asset prices

  • Using the pandemic as a laboratory, we show that asset markets assign a time- varying price to firms' disaster risk exposure. In 2020 the cross-section of realized and expected stock returns reflected firms' different exposure to the pandemic, as measured by their vulnerability to social distancing. Realized and expected return differentials initially widened and then narrowed, but disaster exposure still commanded a risk premium in December 2020. When inferred from market outcomes, resilience correlates not only with social distancing, but also with cash and environmental ratings. However, vulnerability to social distancing is the only characteristic that identifies persistently scarred firms.

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Author:Marco Pagano, Christian WagnerORCiDGND, Josef ZechnerORCiDGND
URN:urn:nbn:de:hebis:30:3-633772
URL:https://ssrn.com/abstract=3983616
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 673
Series (Serial Number):CFS working paper series (673)
Publisher:Center for Financial Studies
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2021
Year of first Publication:2021
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2021/12/20
Tag:asset pricing; pandemics; rare disasters; resilience; social distance
Issue:November 24, 2021
Page Number:85
Note:
Marco Pagano gratefully acknowledges the 2021 Engelbert Dockner Fellowship, as well as financial support from the Italian Ministry for University and Research (MUR) and the Einaudi Institute for Economics and Finance (EIEF). Christian Wagner is an associate member of the Center for Financial Frictions (FRIC) and acknowledges support from grant no. DNRF102.
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht