Pandemic Tail Risk

Matthijs Breugem, Raffaele Corvino, Roberto Marfe () and Lorenzo Schönleber

No 623, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper shows that tail risk in US equity markets increased in advance of the COVID-19 outbreak in February 2020. While tail risk of the market index did not move much before the outbreak, we document that tail risk of less pandemic-resilient economic sectors boomed in advance. This result is robust to alternative specifications of tail risk, measured from either option or credit default swap contracts. Long-horizon tail risk measures provide information about investors perception of pandemic risk persistence and economic recovery.

Keywords: COVID-19; tail risk; economic sectors. (search for similar items in EconPapers)
JEL-codes: G01 G10 G12 G14 (search for similar items in EconPapers)
Pages: pages 36
Date: 2020
New Economics Papers: this item is included in nep-cwa and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:623

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