![]() Only essential businesses were operating during the lockdown periods. A large number of countries entered into lockdowns and households around the world were asked to stay at home for a large part of the first half of 2020 to prevent the spread of the virus. ![]() Covid-19 has led to the shut-down of entire economies and the paralysis of air traffic around the world. Footnote 2 Given it is a new virus, there has not been a vaccine or a treatment for it at first to prevent it from spreading. The virus is highly infectious Footnote 1 but with a lower mortality rate than other coronaviruses such as SARS and MERS. The novel coronavirus Covid-19 emerged in China in December 2019 and was declared a global pandemic on 11 th March 2020 by the World Health Organisation (WHO). The results point towards strong divergence of expectations between US and Asian real estate companies in the onset of Covid-19, which may be associated with the level of prior experience to similar pandemics. Firms in the US perform significantly worse if their exposure to the pandemic is higher, which is not the case in Asia. A Fama–MacBeth regression shows evidence for a low-risk effect during the Covid period: while insignificant prior to the pandemic, the return-risk relationship becomes significantly negative during the Covid period, with valuation effects driving the results in both regions. The most affected sectors in the US are retail and hotels, while in Asia it is office. Real estate sectors experience strong divergence in performance in the US while little sectoral difference is observed in Asia. During the early stages of the pandemic, the sensitivity of Asian real estate companies to the market becomes negative, while it remains positive and increases in the US. I find substantial differences between stocks in Asia and the US as a result of the pandemic. I construct regional Covid-19 Risk Factors (CRFs) to assess how the risk exposure of stocks to the pandemic affects their performance. This paper uses the global systemic shock associated with the outbreak of the novel coronavirus Covid-19 to assess the risk-return relationship in the cross-section of real estate equities in the US and in selected Asian countries.
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