Disaster resilience and asset prices

Marco Pagano, Christian Wagner and Josef Zechner

Journal of Financial Economics, 2023, vol. 150, issue 2

Abstract: Using the COVID-19 pandemic as a laboratory, we show that asset markets assign a time-varying price to firms’ disaster risk exposure. The cross-section of stock returns reflected firms’ different exposure to the pandemic, as measured by their vulnerability to social distancing. As predicted by theory, realized and expected return differentials moved in opposite directions, initially widening and then narrowing. When inferred from market outcomes, firm resilience correlates mainly with exposure to social distancing: vulnerability to social distancing is priced in changes of firms’ expected returns, while measures of financial and environmental resilience are not.

Keywords: Asset pricing; Rare disasters; Social distance; Resilience; Pandemics (search for similar items in EconPapers)
JEL-codes: G01 G11 G12 G14 Q51 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Disaster Resilience and Asset Prices (2021)
Working Paper: Disaster resilience and asset prices (2021)
Working Paper: Disaster Resilience and Asset Prices (2020)
Working Paper: Disaster Resilience and Asset Prices (2020)
Working Paper: Disaster Resilience and Asset Prices (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:150:y:2023:i:2:s0304405x23001447

DOI: 10.1016/j.jfineco.2023.103712

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