Pricing the Pandemic: Evidence from the Bond Market in China

作者：Haoyu Gao, Yiling Ouyang, Huiyu Wen · 发表于：Emerging Markets Finance and Trade · 年份：2023 · DOI：10.1080/1540496x.2023.2199121 · 被引用次数：5 · 研究领域：Banking stability, regulation, efficiency、Insurance and Financial Risk Management、Credit Risk and Financial Regulations

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.