Abstract
This paper is a first look of Covid-19’s effect on the alpha and beta of a US stock exchange traded fund. It uses the efficient market hypothesis and the J-test of non-nested hypotheses to identify a reasonable choice of Covid-19 data for estimating CAPM regressions. Obtained through the generalized method of moments in a panel data analysis, a reasonable choice is Covid-19 spread’s unanticipated severity. Rising unanticipated severity significantly reduces the alphas and betas of mid-cap and small-cap ETFs but not large-cap and sector & speciality ETFs. Hence, retail investors should not market time or panic liquidate, especially when successful vaccination development is likely in the near future. Copyright © 2020 Informa UK Limited, trading as Taylor & Francis Group.
| Original language | English |
|---|---|
| Pages (from-to) | 123-128 |
| Journal | Applied Economics Letters |
| Volume | 29 |
| Issue number | 2 |
| Early online date | 14 Dec 2020 |
| DOIs | |
| Publication status | Published - 2022 |
Citation
Cao, K. H., Woo, C.-K., Li, Y., & Liu, Y. (2022). Covid-19's effect on the alpha and beta of a US stock exchange traded fund. Applied Economics Letters, 29(2), 123-128. doi: 10.1080/13504851.2020.1859447Keywords
- Covid-19
- CAPM
- Stock ETFs
- J-test
- GMM estimation
