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COVID-19: Risk-adjusted portfolio returns of emerging and developed equity markets


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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; Sharpe ratio; Sortino ratio; daily cases and deaths; stock abnormal return

Document Type: Research Article

Affiliations: 1: Professor of Finance at Pepperdine Graziadio Business School (PGBS), Pepperdine University 2: Adjunct Professor of Economics and Business Organisation at the Department of Electrical and Information Engineering, University of Cassino and Southern Lazio 3: Associate Professor of Accounting at Pepperdine Graziadio Business School (PGBS), Pepperdine University 4: Assistant Professor of Finance at Pepperdine Graziadio Business School (PGBS), Pepperdine University

Publication date: December 1, 2020

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  • Journal of Risk Management in Financial Institutions is the essential professional and research journal for all those involved in the management of risk at retail and investment banks, investment managers, broker-dealers, hedge funds, exchanges, central banks, financial regulators and depositories, as well as service providers, advisers, researchers and academics. Guided by expert Editors and an eminent Editorial Board, each quarterly 100-page issue does not publish advertising but rather in-depth articles, reviews and applied research by leading professionals and researchers in the field on six key inter-related areas: strategic and business risk, financial risk, including traditional/exotic credit, market and liquidity risks, operational risk, regulatory and legal risks, systemic risk, and sovereign risk.

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