ABSTRACT
This paper examines whether the COVID-19 pandemic predicts Chinese insurance firms’ stock excess returns. COVID-19 is proxied using three indices: the stringency index, containment and health indices, and the government support index. We use monthly data from January 2020 to September 2020 on 64 insurance firms. Using a newly developed factor-augmented panel predictability model, we find that COVID-19 is a statistically insignificant predictor of excess returns. Our results are robust to the use of different control predictors such as macro variables, financial indicators and Fama-French factors.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
3. See a report by Deloitte for detail discussion on the impact of pandemic on insurance industry: https://www2.deloitte.com/ie/en/pages/covid-19/articles/impact-COVID-19-insurance-industry.html.
4. The Westerlund and Sharma (Citation2019) model allows for multiple stationary predictors and it works perfectly when a predictor is either cross-sectional or time invariant as it can become collinear with the unobservable heterogeneity which leads to an identification problem.
5. For a recent survey of the literature, see Narayan (Citation2021).
6. Available online at Kenneth R. French – Description of Fama/French Factors (dartmouth.edu).