Market Reactions to COVID-19: Does Systemic Risk Vary Across Industries? A Markov-Switching CAPM Approach

Despite a broad consensus on the response of US stock market volatility to the coronavirus outbreak, our micro-level understanding of its variation across industries still needs to be improved. This study contributes to the existing literature by providing an industry-level analysis of the COVID-19...

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Bibliographic Details
Published inEastern European economics Vol. ahead-of-print; no. ahead-of-print; pp. 1 - 20
Main Authors Bulut, Emre, Marangoz, Cumali, Daştan, Muhammet
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 2024
Taylor & Francis Ltd
Subjects
COVID-19
Diversification in industry
Economic theory
Information technology
Real estate
Stock exchanges
stock market volatility
Telecommunications
the MS-CAPM
Eastern Europe
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Summary:Despite a broad consensus on the response of US stock market volatility to the coronavirus outbreak, our micro-level understanding of its variation across industries still needs to be improved. This study contributes to the existing literature by providing an industry-level analysis of the COVID-19 pandemic with two different states. Evidence from the MS-CAPM model indicates the role of portfolio diversification. Specifically, the results reveal that some industries, such as materials, real estate, communication, and utilities, have much higher expected returns. On the other hand, other sectors, including consumer discretionary, industrials, and information technology, become less volatile than the market during the lockdown period.
ISSN:0012-8775
1557-9298
DOI:10.1080/00128775.2023.2173234