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This paper investigates whether security markets price the effect of social distancing on firms operations. We document that firms that are more resilient to social distancing significantly outperformed those with lower resilience during the COVID-19 outbreak, even after controlling for the standard risk factors. Similar cross-sectional return differentials already emerged before the COVID-19 crisis: the 2014-19 cumulative return differential between more and less resilient firms is of similar size as during the outbreak, suggesting growing awareness of pandemic risk well in advance of its materialization. Finally, we use stock option prices to infer the markets return expectations after the onset of the pandemic: even at a two-year horizon, stocks of more pandemic-resilient firms are expected to yield significantly lower returns than less resilient ones, reflecting their lower exposure to disaster risk. Hence, going forward, markets appear to price exposure to a new risk factor, namely, pandemic risk.
Low inflation was once a welcome to both policy makers and the public. However, Japans experience during the 1990s changed the consensus view on price of economists and central banks around the world. Facing deflation and zero interest bound at the s
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own resource level a
After the 2007/2008 financial crisis, the UK government decided that a change in regulation was required to amend the poor control of financial markets. The Financial Services Act 2012 was developed as a result in order to give more control and autho
Recent advances in the fields of machine learning and neurofinance have yielded new exciting research perspectives in practical inference of behavioural economy in financial markets and microstructure study. We here present the latest results from a
Many still rightly wonder whether accounting numbers affect business value. Basic questions are why? and how? I aim at promoting an objective choice on how optimizing the most suitable valuation methods under a value-based management framework throug