VGSF - WU Vienna - LC

Christian Wagner, WU Vienna/VGSF Faculty

online via Microsoft Teams Live Events 11:00 - 12:00

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Chris­tian Wag­ner from WU Vi­enna/VGSF Fac­ulty to present her re­search pa­per.
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Dis­aster Re­si­li­ence and As­set Prices

This pa­per in­vestig­ates whether se­cur­ity mar­kets price the ef­fect of so­cial dis­tan­cing on firms' op­er­a­tions. We doc­u­ment that firms that are more re­si­li­ent to so­cial dis­tan­cing sig­ni­fic­antly out­per­formed those with lower re­si­li­ence dur­ing the COV­ID-19 out­break, even after con­trolling for the stand­ard risk factors. Sim­ilar cross-sec­tional re­turn dif­fer­en­tials already emerged be­fore the COV­ID-19 crisis: the 2014-19 cu­mu­lat­ive re­turn dif­fer­en­tial between more and less re­si­li­ent firms is of sim­ilar size as dur­ing the out­break, sug­gest­ing grow­ing aware­ness of pan­demic risk well in ad­vance of its ma­ter­i­al­iz­a­tion. Fi­nally, we use stock op­tion prices to in­fer the mar­ket's re­turn ex­pect­a­tions after the on­set of the pan­demic: even at a two-year ho­ri­zon, stocks of more pan­dem­ic-re­si­li­ent firms are ex­pec­ted to yield sig­ni­fic­antly lower re­turns than less re­si­li­ent ones, re­flect­ing their lower ex­pos­ure to dis­aster risk. Hence, go­ing for­ward, mar­kets ap­pear to price ex­pos­ure to a new risk factor, namely, pan­demic risk.



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