Pandemics, Vaccines and an Earnings Damage Function

Harrison Hong, Jeffrey D. Kubik, Neng Wang, Xiao Xu and Jinqiang Yang

No 27829, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We derive a parsimonious model of damage to corporate earnings from COVID-19. Using measures of expected damage from industry-level earnings forecast revisions, we estimate this model with nonlinear least squares and identifying restrictions related to forecast rationality. Forecasts in mid-May 2020 imply an earnings crash and lower earnings growth until a vaccine arrives in 1.48 years (95% CI [0.61, 5.88]). We extend our framework to account for time-varying vaccine arrival rates. Mid-August 2020 forecasts imply a vaccine arrival in 0.61 years (95% CI [0.35, 1.06]), which is due to positive vaccine news as opposed to fiscal or monetary policy news.

JEL-codes: G10 G12 G31 G32 (search for similar items in EconPapers)
Date: 2020-09
Note: AP CF
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Citations: View citations in EconPapers (6)

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