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Pandemic Tail Risk

Author

Listed:
  • Matthijs Breugem
  • Raffaele Corvino
  • Roberto Marfè
  • Lorenzo Schönleber

Abstract

This paper shows that tail risk in US equity markets increased in advance of the COVID-19 outbreak in February 2020. While tail risk of the market index did not move much before the outbreak, we document that tail risk of less pandemic-resilient economic sectors boomed in advance. This result is robust to alternative specifications of tail risk, measured from either option or credit default swap contracts. Long-horizon tail risk measures provide information about investors perception of pandemic risk persistence and economic recovery.

Suggested Citation

  • Matthijs Breugem & Raffaele Corvino & Roberto Marfè & Lorenzo Schönleber, 2020. "Pandemic Tail Risk," Carlo Alberto Notebooks 623, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:623
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    COVID-19; tail risk; economic sectors.;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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