Disaster Resilience and Asset Prices

62 Pages Posted: 19 May 2020 Last revised: 15 Jun 2021

See all articles by Marco Pagano

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Christian Wagner

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

Josef Zechner

Vienna University of Economics and Business

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Date Written: June 15, 2021

Abstract

Using the pandemic as a laboratory, we show that asset markets assign a time-varying price to firms' disaster risk exposure. In 2020 the cross-section of realized and expected stock returns reflected firms' different exposure to the pandemic, as measured by their vulnerability to social distancing. Realized and expected return differentials initially widened and then narrowed, but disaster exposure still commanded a risk premium in December 2020. When inferred from market outcomes, resilience correlates not only with social distancing, but also with cash and environmental ratings. However, vulnerability to social distancing is the only characteristic that identifies persistently scarred firms.

Keywords: asset pricing, rare disasters, social distance, resilience, pandemics

JEL Classification: G01, G11, G12, G13, G14, Q51, Q54

Suggested Citation

Pagano, Marco and Wagner, Christian and Zechner, Josef, Disaster Resilience and Asset Prices (June 15, 2021). Available at SSRN: https://ssrn.com/abstract=3603666 or http://dx.doi.org/10.2139/ssrn.3603666

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Research Institute of Industrial Economics (IFN)

Box 55665
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Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Christian Wagner (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

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