Disaster Resilience and Asset Prices

105 Pages Posted: 19 May 2020 Last revised: 12 Sep 2023

See all articles by Marco Pagano

Marco Pagano

CSEF - University of Naples Federico II - 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

Multiple version iconThere are 3 versions of this paper

Date Written: August 23, 2023

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

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

Suggested Citation

Pagano, Marco and Wagner, Christian and Zechner, Josef, Disaster Resilience and Asset Prices (August 23, 2023). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3603666 or http://dx.doi.org/10.2139/ssrn.3603666

Marco Pagano

CSEF - University of Naples Federico II - 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
Grevgatan 34, 2nd floor
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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