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Canadian stock market since COVID‑19: Why a V-shaped price recovery?

Author

Listed:
  • Jean-Sébastien Fontaine
  • Guillaume Ouellet Leblanc
  • Ryan Shotlander

Abstract

Between February 19 and March 23, 2020, the Canadian stock market plunged due to the severe economic impact of COVID-19. By the end of the summer, the stock market had already recovered a significant portion of its losses, leaving many asking if investors see the economy through rose-coloured glasses. Despite these concerns, we find that current market valuations for companies on the Toronto Stock Exchange align well, on average, with the declines in earning forecasts observed since the start of the year. We also find these market valuations are consistent with the discount rate returning to its pre-pandemic level.

Suggested Citation

  • Jean-Sébastien Fontaine & Guillaume Ouellet Leblanc & Ryan Shotlander, 2020. "Canadian stock market since COVID‑19: Why a V-shaped price recovery?," Staff Analytical Notes 2020-22, Bank of Canada.
  • Handle: RePEc:bca:bocsan:20-22
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    File URL: https://www.bankofcanada.ca/2020/10/staff-analytical-note-2020-22/
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    Cited by:

    1. Jean-Sébastien Fontaine & Corey Garriott & Jesse Johal & Jessica Lee & Andreas Uthemann, 2021. "COVID-19 Crisis: Lessons Learned for Future Policy Research," Discussion Papers 2021-2, Bank of Canada.

    More about this item

    Keywords

    Asset pricing; Coronavirus disease (COVID-19); Financial markets;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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