COVID-19 Infection of Australian Companies

43 Pages Posted: 26 May 2020 Last revised: 8 Jun 2020

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Allan Trench

The University of Western Australia

Date Written: June 2020

Abstract

This paper analyzes the impact of the coronavirus pandemic on Australian companies’ share prices. We use daily new infections as a risk factor and proxy for the severity of the pandemic. Based on the loading to this risk factor and abnormal returns during the crisis we categorize firms into (i) severely infected, (ii) infected and (iii) mildly or not infected. We find large differences across firms and sectors highlighting that the virus does not affect all firms and not in the same way contrasting evidence of financial contagion and excess co-movement from past crises. The increased cross-sectional dispersion of returns in the pandemic suggests a sophisticated response of investors resulting in significant diversification benefits.

Keywords: COVID-19, coronavirus, contagion, systemic risk, idiosyncratic risk

JEL Classification: G01, G12

Suggested Citation

Baur, Dirk G. and Trench, Allan, COVID-19 Infection of Australian Companies (June 2020). Available at SSRN: https://ssrn.com/abstract=3609110 or http://dx.doi.org/10.2139/ssrn.3609110

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Allan Trench

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

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