Pricing the Pandemic: Evidence from the Bond Market in China
Emerging Markets Finance and Trade
; 2023.
Article
in English
| Scopus | ID: covidwho-2323166
ABSTRACT
This study investigates whether and how the pandemic is priced in the bond market in China. Using the city-level COVID-19 cases on a daily basis, we find a significant positive relationship between the pandemic outbreak and corporate credit spreads, implying that investor risk perception on pandemic exposure attracts a premium. Consistent with the default risk channel, corporate financial resilience alleviates pandemic pricing. Information asymmetry and tail risk can amplify the pricing effect because of reduced investor risk-bearing capacity. These findings are robust in addressing endogeneity concerns. We contribute to the emerging literature on the pandemic effect on credit markets. © 2023 Taylor & Francis Group, LLC.
Full text:
Available
Collection:
Databases of international organizations
Database:
Scopus
Type of study:
Prognostic study
Language:
English
Journal:
Emerging Markets Finance and Trade
Year:
2023
Document Type:
Article
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