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COVID-19: Risk-adjusted portfolio returns of emerging and developed equity markets
Journal of Risk Management in Financial Institutions,
14
(1),
72-83
(2020)
Abstract
This study examines the impact of the novel coronavirus (COVID-19) on the stock markets’ risk and return across emerging and developed countries. Based on a sample of 76 countries from 14th January through 19th August, 2020, the authors find that the stock excess returns are negatively related to daily new cases, but not deaths from COVID-19. The authors’ ex-post analysis indicates that the daily cases from COVID-19 are strongly related to daily stock excess returns in both emerging and developed markets during the declining period of the equity markets (pre 23rd March, 2020). Although the equity markets in the developed countries have experienced an unprecedented recovery during post 23rd March, 2020, the authors find that the stock markets in emerging countries exhibit greater positive abnormal returns above their respective market benchmarks. Findings from their ex-post analysis indicate that there is a portfolio diversification that could have been gleaned by investing in both emerging and developed equity markets during the post stock markets’ decline due to COVID-19.
Keywords: COVID-19; stock abnormal return; Sharpe ratio; Sortino ratio; daily cases and deaths
The full article is available to subscribers to the journal.
Author's Biography
Maretno Agus Harjoto is a Professor of Finance at Pepperdine University Graziadio Business School. His research focuses on COVID-19, financial markets, corporate governance, board diversity, and corporate social responsibility. He holds the 20192021 Denney Chair Professorship awards.
Fabrizio Rossi is an Adjunct Professor of Economics and Business Organisation at the University of Cassino and Southern Lazio, with a doctorate of philosophy in Management Engineering. He holds the National Scientific Qualification as Associate Professor of Corporate Finance and Economics of Financial Intermediaries. His research interests focus on corporate finance, corporate governance, corporate social responsibility, and intellectual capital and firm financial performance.
Robert Lee is an Associate Professor of Accounting at the Pepperdine University Graziadio Business School. His research focuses on examining the judgment and decision-making process in accounting and auditing contexts. He received the Rothschild Research Fellow and was awarded a Julian Virtue Scholarship in 2013–2014 and 2017–2019.
Clemens Kownatzki is an Assistant Professor of Finance at the Pepperdine University Graziadio Business School. He has been an executive in the financial services industry for well over two decades. His experience ranges from management positions in brokerage and treasury operations to advising corporate as well as retail clients with a focus on managing their risk effectively. His research and teaching interests focus on risk management and portfolio management.
Citation
Harjoto, Maretno Agus, Rossi, Fabrizio, Lee, Robert and Kownatzki, Clemens (2020, December 1). COVID-19: Risk-adjusted portfolio returns of emerging and developed equity markets. In the Journal of Risk Management in Financial Institutions, Volume 14, Issue 1. https://doi.org/10.69554/MYCW2586.
© Henry Stewart
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Publications LLP