COVID-19: Risk-adjusted portfolio returns of emerging and developed equity markets

Maretno Agus Harjoto, Fabrizio Rossi, Robert Lee and Clemens Kownatzki
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Maretno Agus Harjoto: Professor of Finance at Pepperdine Graziadio Business School (PGBS), Pepperdine University, USA
Fabrizio Rossi: Adjunct Professor of Economics and Business Organisation at the Department of Electrical and Information Engineering, University of Cassino and Southern Lazio, Italy
Robert Lee: Associate Professor of Accounting at Pepperdine Graziadio Business School (PGBS), Pepperdine University, USA
Clemens Kownatzki: Assistant Professor of Finance at Pepperdine Graziadio Business School (PGBS), Pepperdine University, USA

Journal of Risk Management in Financial Institutions, 2020, vol. 14, issue 1, 72-83

Abstract: This study examines the impact of the novel coronavirus (COVID-19) on the stock markets’ risk and return across emerging and developed countries. Based on a sample of 76 countries from 14th January through 19th August, 2020, the authors find that the stock excess returns are negatively related to daily new cases, but not deaths from COVID-19. The authors’ ex-post analysis indicates that the daily cases from COVID-19 are strongly related to daily stock excess returns in both emerging and developed markets during the declining period of the equity markets (pre 23rd March, 2020). Although the equity markets in the developed countries have experienced an unprecedented recovery during post 23rd March, 2020, the authors find that the stock markets in emerging countries exhibit greater positive abnormal returns above their respective market benchmarks. Findings from their ex-post analysis indicate that there is a portfolio diversification that could have been gleaned by investing in both emerging and developed equity markets during the post stock markets’ decline due to COVID-19.

Keywords: COVID-19; stock abnormal return; Sharpe ratio; Sortino ratio; daily cases and deaths (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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