TY - JOUR
T1 - Covid-19’s effect on the alpha and beta of a US stock Exchange Traded Fund
AU - Cao, Kang Hua
AU - Woo, Chi Keung
AU - Li, Ya
AU - Liu, Yun
N1 - Funding Information:
C.K. Woo’s research is funded by research grants (#4388 and #4400) from the Education University of Hong Kong. Without implications, all errors are ours.
This work was supported by the Education University of Hong Kong [4388,4400].
Publisher Copyright:
© 2020 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2022/1/19
Y1 - 2022/1/19
N2 - 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.
AB - 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.
KW - CAPM
KW - Covid-19
KW - GMM estimation
KW - J-test
KW - stock ETFs
UR - http://www.scopus.com/inward/record.url?scp=85106770440&partnerID=8YFLogxK
U2 - 10.1080/13504851.2020.1859447
DO - 10.1080/13504851.2020.1859447
M3 - Journal article
AN - SCOPUS:85106770440
SN - 1350-4851
VL - 29
SP - 123
EP - 128
JO - Applied Economics Letters
JF - Applied Economics Letters
IS - 2
ER -
