An Industry-Level Analysis of a Pandemic's Impact on Stock Market Risk

We examine stock market risk surrounding the COVID-19 pandemic at the industry level. We find that low-beta industries experienced a significant increase in relative risk at the worst possible time. Shocks to market beta were not accompanied by offsetting changes in loadings on other factors, suggesting that risk didn’t merely shift from one factor to another. The risk dynamics differed substantially from those surrounding the 2008 financial crisis, when spikes were not concentrated in low-beta industries. Our results bear important implications for investors and firms in the event of another pandemic.