Pandemics and Financial Assets

Abstract

There have been several pandemics in the history of mankind. One of the major pandemics was the Spanish flu that took place in 1918, in which millions of lives were lost globally. Despite significant advances in science and medicine since then, the COVID-19 pandemic has still caused major impacts around the world. As evidenced, pandemics not only cause social and public health implications, but also cause effects on the economy as well. This chapter addresses the ill effects of pandemics on the economy and presents how the financial markets and financial institutions were influenced and how they responded to the pandemics. More specifically, this chapter identifies the effects of the pandemics on various assets (e.g., crude oil, gold, currencies, equity, bonds, and cryptocurrencies) around the world. In addition, the chapter also presents evidence of corporates’ characteristics relative to their responses to the ill effects of the pandemics.

1. Introduction

It is now almost evident that our world seems to have entered into an infinite loop of new outbreaks of variants of the coronavirus that led to the COVID 19 pandemic. Beginning in early 2020, the coronavirus spread throughout the world and caused concern, as reflected in the world stock indexes. Even in the third year of this ongoing pandemic, it is clear that, despite vaccination and awareness, the new variant Omicron is causing investors to panic [1, 2]. Due to the extreme impacts of these epidemics, it is critical to investigate pandemics and their pessimistically veiled aspects to develop effective strategies. In this chapter, we will explore how this health outbreak impacted the economy and financial markets and how market participants responded to the pandemic.

The rest of the chapter is organized as follows. In the following sections, we review the literature on how the pandemic impacts the equity market and provide a brief discussion on how COVID-19 differs from other crises. Section 3 presents a discussion of how the pandemics impact other financial assets, including communities, foreign exchange, and cryptocurrencies. The fourth section analyzes corporate characteristics relative to their responses to the ill effects of the pandemic. Lastly, we end with the concluding remarks.

2. Pandemic and financial market

2.1 Prior pandemic

Throughout human history, there have been numerous health outbreaks, such as foot and mouth disease, severe acute respiratory syndrome (SARS), bird flu (H5N1), and swine flu (H1N1). During the SARS outbreak in 2003, a total of 8098 people worldwide became sick, and 774 people died. Even though SARS is contagious and spread by close person-to-person contact, it is short-lived, with only 8 months separating the first reported case and the end of the crisis. While Ebola was first seen in West Africa, unlike other outbreaks, Ebola killed 86 people on the first day of the disease. It has shown fatality rates ranging from 25–90% in past outbreaks. These outbreaks have significant social and economic impacts, such as increasing social tension and people’s health as well as the economy.

Barro et al. [3] calculated that the death rate of the 1918–1920 Spanish influenza pandemic would imply a 6- to 8-percentage-point drop in GDP and consumption in a typical country. Other researchers, on the other hand, have shown that a health outbreak can have a significant impact on the stock market and real economic activity. During the SARS outbreak, for example, the growth rate of household income fell by more than 3% [4], while the average price of Hong Kong real estate fell by 1.6% [5]. In the same way, Ichev & Marinč [6] found that the 2014–2016 Ebola outbreak events were followed by bad financial market returns.

The epidemic had the most serious impact on the tourism industry: hotels, restaurants, theme parks, and airlines. Chen et al. [7] found that within a month of the SARS outbreak, Taiwanese hotel stocks experienced steep declines in earnings and stock prices (approximately 29%), while the manufacturing, retail trade, and banking industries were less affected. Meanwhile, some industries benefited from concerns about health outbreaks. During the SARS outbreak, the biotechnology sector emerged stronger [7]. Similarly, the study by Donadelli et al. [8] documented that disease-related news has a positive impact on pharmaceutical stocks. As a result, investors shifted their assets from the financial market to the relatively low-risk real sector [9].

The impact of the health outbreak does not only affect the economy and investors’ behavior; it also influences corporations’ operations and strategies. Health outbreaks have led to great uncertainty about future cash flow, and investors may reduce investment due to uncertain demand and limited budgets. Besides the uncertainty of the epidemic, which increases default rates on credit cards and mortgages [10], the cost of bank loans, restrains the volume of bank lending [11]. While the approval of vaccines significantly mitigates the adverse impact of the outbreak [11].

Media coverage of major disasters, such as the Ebola outbreak, can heighten anxiety, depression, and terror, leading to risk aversion and pessimism among investors. Del Giudice and Paltrinieri [12] investigated observed monthly flows of geographically specialized equity mutual funds in African countries during the Ebola outbreak. They discovered that the disease outbreak had a statistically significant negative impact on monthly net flows. The effect was especially strong when linked to the event’s media coverage. In a similar vein, Ichev and Marinč [6] proposed that outbreak events are more relevant for companies that are geographically closer to both the outbreak’s birthplace and the financial markets.

In short, the external and unexpected shocks from health outbreaks can affect economic trends and suddenly change investors’ sentiment. The magnitude of the adverse impact also depends on the industry, media coverage, and geographic area.

2.2 Why is the COVID-19 crisis different from other crises?

In 2008, the global financial crisis triggered a massive liquidity crisis as authorities hurried to implement emergency assistance packages to save financial institutions and enterprises. It saw the demise of well-known financial institutions such as Lehman Brothers, Freddie Mac, and Fannie Mae, as well as Northern Rock. It’s important to recognize that the pandemic issue is very different from the global financial crisis of 2008. The COVID-19 pandemic is a health-related disaster that has far-reaching consequences not just for global economies but also for our everyday lives.

While no two epidemics are comparable, the current pandemic is fundamentally different from previous outbreaks. COVID-19 is much more dangerous than previous outbreaks [13, 14, 15]. Compared to other health outbreaks, the number of deaths COVID-19 has caused (more than 5.64 million people as of January 28, 2021) is actually more comparable with previous flu pandemics. More stringent public health measures that disrupt economic activity were implemented in response to the pandemic. As a result, the COVID-19 pandemic disaster has paralyzed the world more than any other crisis. Empirical evidence also suggests that the impact of European and US markets during the era of COVID-19 is high as compared to the GFC time [16]. Additionally, the implied volatility index (VIX), also known as the “fear gauge,” has moved and has risen to its highest level since the GFC, while the US 10-year treasury yield index has fallen to a new low [17]. In addition, unlike other disease outbreaks, only WHO’s public health risk announcements related to COVID-19 had a significant negative effect on stock markets, at least for 30 days [18].

Overall, no pandemic is likely to have had such a devastating economic impact as COVID-19, which caused a near-total shutdown of social and economic activity.

2.3 Equity market and COVID-19

In December 2019, the COVID-19 outbreak was triggered in the city of Wuhan, which is in the Hubei province of China. More than 2 years have passed, and the virus is still spreading over the planet. Although China was initially the epicenter of the outbreak, instances are now being reported in a variety of other nations. The impact of the outbreak was not only the slowing down of the Chinese economy with interruptions to production, the functioning of global supply chains has also been disrupted. The outbreak triggered fears and uncertainty in the financial markets, resulting in lower market returns and increased stock market volatility [18, 19, 20, 21, 22]. As a result, investors suffered significant losses in a short period of time due to a very high level of risks [23]. This, in turn, has led to more financial market turmoil and made the economic shock even worse. Compared to previous pandemics, there was more borrowing and more debt among businesses and households during this time. This makes the short-term shocks more powerful than in the past.

During periods of high economic policy uncertainty, especially during COVID-19, economic policy uncertainty has a significant impact on the financial stock market and affects investment returns. Various studies have examined the impact of investor sentiment on the stock market during the pandemic. Some researchers use the VIX as a proxy for investors’ general attitude or tone toward future cash flows and investment risk of a particular security or financial market (e.g., [15, 24, 25]). An increase in VIX indicates a greater need for risk protection and higher market volatility. In particular, the VIX is used to quantify investors’ fear. One of the early studies by Baker et al. [14] examined the US stock market volatility based on the daily news headlines and found that the pandemic had an unprecedented effect on VIX, especially after February 24, 2020. In addition, they argued that no prior infectious disease outbreak has resulted in daily stock market swings as dramatic as the response to COVID-19 developments in 2020. One of the possible explanations for this result would be the government’s limits on commercial activity and deliberate social separation, which have powerful consequences in a service-oriented economy.

Other researchers focused on the implied volatility derived from stochastic volatility models (e.g., [26, 27, 28]). For instance, Mirza et al. [28] evaluated the price reaction, performance, and volatility timing of European investment funds during the outbreak. They found that social entrepreneurship funds outperformed their counterparts during the epidemic. These results reflect the reality that as the world becomes increasingly uncertain, investors are putting more emphasis on social aspects. Stock volatility, however, is not directly observed in practice, but rather inherently latent. Thus, some researchers recommend using so-called realized volatilities, which are calculated by adding the squared intraday interval return, as a proxy for volatility. Chatjuthamard et al. [29] separated the realized volatility into continuous and discontinuous jump components to investigate the impact of COVID-19 on the global stock market. They found that an increasing the growth rate of COVID-19 confirmed cases would lead to increased volatility and jumps while reducing the return. Besides, they also found that the risk from COVID-19 overshadows economic, financial, and political risks. Overall, these studies highlight the fact that COVID-19 caused pronounced market movements, extreme volatility, and unprecedented disruption to the economy.

Though the pandemic has been found to disrupt the financial market, some industries have been more affected than others. In the wake of the pandemic, some industries (such as transportation, hotels, and restaurants) have ceased operations, while others continue to operate to provide basic requirements (e.g., communication, healthcare, and pharmaceuticals). As a result, investment and consumption patterns have shifted dramatically. Some of the losses are attributable to investors’ realistic estimate that profits may drop as a result of the pandemic’s effects. For instance, Mazur et al. [30] found that during March 2020, natural gas, food, healthcare, and software sectors performed abnormally well, generating high returns, whereas petroleum, real estate, entertainment, and hospitality stocks plummeted considerably, losing more than 70% of their market capitalizations.

In light of the growing disruptions caused by the COVID-19 pandemic, the information flow related to the pandemic is critical. The higher media coverage in the pandemic period led to negative sentiments which caused markets to decline and volatility to rise. This view is supported by Haroon and Rizvi [31], who found panic by news outlets has been linked to increased stock volatility and the association is stronger for industries severely affected by the pandemic’s occurrences. Researchers show the number of confirmed COVID-19 cases and deaths could be predictive factors of financial assets, such as stock volatility [19, 32], oil prices [33], and cryptocurrencies [34]. Similarly, Baker et al. [14] documented that news related to COVID-19, both positive and negative, is the dominant driver of large daily U.S. stock market moves. With technological advancement, a growing body of literature seems to agree that investors’ attention and trends measured by internet activities, such as Google Trends, Twitter tweets, and other social media trends, could possess predictive power for trading volume and volatility of financial assets. This view is supported by Chatterjee and French [35], who documented that equity market volatility and liquidity are more sensitive to the uncertainty contained in tweets, as measured by the Twitter market uncertainty index (TMU), during the outbreak. Interestingly, previous research has established that fake news and media coverage during the outbreak has had an adverse effect on some countries’ stock market returns [36].

The timeframe could be considered another determinant of the impact of the coronavirus on the global market. The global market’s uncertainty increased when the coronavirus moved from epidemic to pandemic stage (11th March 2020 onwards) [37]. The equity market dramatically fell during the pandemic stage, evident from the higher negative return.

Another factor that could impact the relationship between the COVID-19 situation and the stock market is government interventions. The government has played a critical role in addressing the crisis caused by this disease outbreak. During the recent pandemic, governments implemented a variety of policies to mitigate the pandemic’s impact. Globally, travel bans (i.e., closing international borders), lockdowns (i.e., restricting people’s movement), and fiscal stimulus and relief packages (e.g., monetary policy, interest rates, quantitative easing, and corporate bond liquidity stabilization fund) were implemented. Stock markets responded positively to these policies because they could slow the spread of the disease and potentially calm panic. This view is supported by Narayan et al. [38], who investigated the effects of the G7 countries’ government responses to the pandemic. They discovered that stock markets reacted favorably to government policies, particularly lockdowns. Baker et al. [14] agreed, finding that lockdowns and voluntary social distancing were the primary reasons why the US stock market reacted much more negatively to COVID-19 than to previous pandemics.

Government interventions signal changes in future economic conditions, which may affect company cash-flow expectations and, as a result, stock prices. As a result, investors may revise their portfolios, resulting in increased volatility within and across asset classes. In line with this notion, Zaremba et al. [39] investigate the relationship between COVID-19 pandemic policy responses and stock market volatility in 67 countries. Surprisingly, their findings suggested that stringent policy responses increase return volatility and that the effect is unrelated to the increase in confirmed COVID-19 cases and deaths. One implication of these findings is that, while government interventions may slow the spread of the pandemic, they may also increase volatility in financial markets, resulting in widespread sales of risky assets.

Though in previous health crises, the geographical location of the outbreak determined the relationship between the event and the financial market, globalization has brought economies closer together and strengthened the interdependence of financial markets around the world. The number of COVID-19 deaths in one country influences not only the performance of the local stock market but also the stock markets of other countries and commodities. Akhtaruzzaman et al. [40], for instance, found that listed firms across China and G7 countries experience a significant increase in conditional correlations between their stock returns as the pandemic’s trajectory develops. China and Japan appeared to be net spillover transmitters, implying that financial contagion follows a pattern similar to virus infection. He et al. [41] suggested that the impact of COVID-19 on the European and US stock markets has a spillover effect on the Asian stock markets, particularly China. In addition, they also reported no evidence to suggest that the outbreak has had a negative impact on these countries’ stock markets greater than the global average, as measured by the S&P Global 1200 index.

Conversely, some authors claim that the pandemic has accelerated the trend of de-globalization and de-dollarization [42]. Okorie and Lin [43] observe that the fractal contagion effect occurs only in the short run and that it disappears in the middle and long run for both stock market return and volatility. Similarly, Ali et al. [37] split the timeframe into three phases, beginning with casualties in China (which shows China as the epicenter of the epidemic), moving to the start of casualties in Europe (which shows Europe as the epicenter of the epidemic), and finally, when casualties began in the United States (the new epicenter). Unlike in previous pandemics, the levels of volatility in the Chinese market did not change significantly during all three phrases, indicating a lower level of global integration and early efforts by the authorities to stop the virus’s spread.

When faced with the unknown upheaval of the coronavirus crisis, investors fear and avoid taking any risks, leading them to engage in irrational behavior. After the GFC, investors are more sensitive to asset losses. As a result, they are more likely to imitate the behavior and actions of other investors based on private information or public knowledge about their behavior. This irrational behavior can lead to significant mispricing and might create additional risks in financial markets. In finance, this kind of action is also known as herding behavior. Prior literature suggested that, under extreme market conditions induced by COVID-19, herding behavior is more pronounced for upside market movement, lower market trading volume, and lower market volatility [44]. Similar results are also found in the cryptocurrency market [45] and crude oil market [46].

Everyone has an incomplete view of the world. But we form a complete narrative and fill in the gaps. Our past experiences shape who we are today, as well as our decision-making process. Likewise, it has been suggested that prior exposure to similar events can influence risk aversion and investment decisions [47]. This notion is also true during the recent pandemic. Researchers found supporting evidence for the imprint theory in the behavioral bias of investors. Investors who have previously experienced such crises are more likely to react promptly than those without such experience or imprints. In addition, the timely attention and proactive responses to coronavirus situations of both individuals and governments are more prominent in nations with previous health outbreak experiences [48]. It was found that during the COVID-19, countries that had SARS 2003 saw less return and volatility spillover between stock markets [49]. This could imply that companies with past pandemic experience were found to make better decisions in the coronavirus outbreak. However, researchers also found that the experience of the current pandemic also impacted investors’ decisions. Brands with names resembling aspects of the “coronavirus” began to experience abnormal losses and sustained periods of trading volatility [50]. Likewise, Yue et al. [51]‘s findings showed that households that know someone infected with COVID-19 lose confidence in the economy and are more likely to change their risk behavior and become risk-averse.

In view of all that has been mentioned so far, it seems that the recent pandemic COVID-19 has exacerbated financial market volatility and the economic shock. Nevertheless, the impacts of COVID-19 are heterogenous across industries, time frames, governments, and the flow of information.

3. Alternative investment and COVID-19

As investors worry about the pandemic’s economic consequences, the volatility has spiked, in some cases to levels last seen during the global financial crisis. Market liquidity has deteriorated significantly and investors embraced alternative investments in their portfolio for higher returns and shifting away from low-yield debt securities. As part of this trend, precious metals [52, 53, 54, 55], bitcoin [52, 53], commodities [56, 57], and foreign exchange currencies [54, 58, 59] are all considered safe-haven assets in periods of financial crisis.

Precious metals, such as gold, silver, platinum, and palladium, are considered effective diversifiers against stock market returns in several developed and emerging economies. They can help investors build a portfolio that mitigates the downside market risk. Ji et al. [56] evaluated the safe-haven role of assets from December 2019 to March 2020. By observing the downside risk (i.e., the left-tail of the return distribution), they argued that gold has an irreplaceable role in preserving the value of investment during the recent crisis. Besides, many countries have adopted unconventional macroeconomic measures in response to the COVID-19’s impact on the exchange rate and to prevent disruption in the long-term downward trend in exchange rate volatility. And gold serves as a safe-haven asset to protect against the risk of exchange rate depreciation [60].

Yet, with the unique characteristics of COVID-19, gold could not always act as a safe haven. This view is supported by Akhtaruzzaman et al. [52], who found that gold served as a safe-haven asset for stock markets only from December 31, 2019 to March 2020. However, from March 17 to April 24, 2020, gold failed to protect investor wealth and became a hedge instead. This interesting result confirms the findings reported by Cepoi [36], who observed the gold return has a nonlinear positive correlation with the stock markets, which intensifies during extreme bearish and bullish periods, indicating that gold does not behave as a safe-haven asset. Likewise, Cheema et al. [54] suggested that during the pandemic, investors might have lost trust in gold and preferred liquid and stable assets rather than gold. Taken together, it is unclear whether gold acts as a safe haven during the COVID-19 turmoil.

Some claim that cryptocurrency or digital currency is distinct from financial assets and that it might be viewed as a new form of virtual gold. It is frequently portrayed as a panacea capable of replacing financial institutions and protecting the global financial system from sovereign risk and vulnerability [61]. Furthermore, the cryptocurrency appears to be unrelated to stock market returns [61, 62] and exchange rate [63]. Therefore, they are an ideal asset to reduce financial risks during periods of crisis. During the COVID-19, some researchers suggested that cryptocurrencies, such as Bitcoin, could play an important role as a safe haven (for example see [64, 65, 66]). Goodell and Goutte [65] applied wavelet methods to daily data of COVID-19 deaths and Bitcoin prices from December 31, 2019 to April 29, 2020, demonstrating that the intensity of the COVID-19 crisis caused a rise in Bitcoin prices. Similarly, Caferra and Vidal-Tomás [66] suggested that, unlike traditional stock markets, cryptocurrencies only experienced a brief moment of financial panic during COVID-19 because of the lack of a link between digital currency and the actual economy. Bouri et al. [53] also found that bitcoin is the least reliant and has a competitive advantage over gold and other commodities.

Nonetheless, some researchers argue that cryptocurrencies, such as bitcoin and ethereum, only exhibit short-term safe-haven properties as well as high volatility [67]. Cryptocurrencies appeared as speculative assets and presented more systematic risk than investments in the stock markets during COVID-19 [50, 54]. Conlon and McGee’s [68] finding suggested that, rather than acting as a safe haven, Bitcoin may instead increase portfolio downside risk relative to holding the S&P 500 alone. Yet, not all cryptocurrencies behave in the same manner. Goodell and Goutte [69] examine the role of COVID-19 in the paired co-movements of four cryptocurrencies and seven equity indices. They found that the co-movements between cryptocurrencies and equity indices gradually increased as the pandemic escalated. However, they also found that tether behaved differently from other cryptocurrencies. It moved negatively with equity markets both before and during the COVID-19 outbreak. One explanation for this result would be that the stablecoin tether has particular utility as a vehicle for liquidity, and one tether is supposed to be backed by one dollar. Hence, the properties of the tether are similar to those of fiat currency rather than digital currency. This finding is also consistent with Hasan et al. [70], who found Tether has emerged as a strong new safe haven during the pandemic.

In addition to gold and cryptocurrency, currencies and commodities can also potentially offer a safe-haven role in financial markets. Alali [58], or example, says that the Swiss franc is a good investment during a time when there is a lot of diseases. Similarly, Cheema et al. [54] also found the Swiss franc served as a strong safe haven during both the Global Financial Crisis of 2008 and the COVID-19 pandemic. Nevertheless, some studies suggest that cross-currency hedge strategies are likely to fail during this period. Umar and Gubareva [59] detected a positive relationship between the panic level, as measured by the Pavenpack Coronavirus Panic Index, and the dynamics of leading fiat currencies, such as the Euro, British pound, and Renminbi currencies.

The coronavirus has been labeled a pandemic; thus, its effects are expected to be seen throughout multiple countries, regions, and continents. To put it another way, it is likely to have an impact on worldwide demand and supply of products and services, particularly commodity prices. Ji et al. [56] show that soybean commodity futures remain robust as safe-haven assets during the current pandemic. There is also evidence of a positive relationship between commodity price returns and the global fear index (GFI), confirming that commodity returns increase as COVID-19 related fear rises [57]. In addition, Salisu et al. [57] also suggested that the commodity market offers better safe-haven properties than the stock market. Just like other financial assets, the properties of commodities are heterogeneous. Oil prices seem to have dropped a lot since the pandemic started, but food commodity futures like soybeans made money on average during the COVID-19 pandemic [56].

Considering all of this evidence, it seems that which asset is considered as a safe-haven asset during the COVID-19 turmoil. These inconsistent results are common findings in financial literature, suggesting that the relationship between financial assets is dynamic. Safe-haven assets can change over time [52, 70]. For example, gold may have been perceived as a safe haven during the early stages of the COVID-19, but as the pandemic progressed, gold has become a hedging asset instead.

4. Corporate in the midst of the pandemic

While some researchers have focused on how the financial markets react to the pandemic situation, other researchers have focused on firm actions and characteristics during the outbreak. As mentioned earlier, the pandemic would impact the corporate operation. Governments are shutting down huge sectors of their economies, ostensibly to stop the spread of infectious diseases but potentially putting the vast majority of businesses in danger of running out of cash. While the effect is temporary for some firms, many firms will experience it in the long term, leading to financial distress. Under these circumstances, corporate funding is becoming increasingly important to prevent liquidity issues from becoming solvency issues (e.g., [71, 72, 73]). There is evidence suggesting that during the early phase of the pandemic, firms were able to raise substantial amounts of external financing by drawing down lines of credit from banks and by accessing the public market [74]. Besides, the rating risk induced by the COVID-19 shock could impact the firms’ decisions on the source of funding. Firms on the cusp of being downgraded to non-investment status (i.e., firms with a BBB rating) are likely to behave most aggressively to increase their cash-holding through their credit lines with banks, while AAA- to A-rated firms manage to maintain access to liquidity through the public capital market, that is, by issuing bonds and equity. In contrast to existing evidence on bond maturities in previous crises, firms chose to issue bonds with maturities that exceeded those of bonds issued before by the same firms, as well as the average maturities during normal times [75]. Considering all of this evidence, it seems that during the early part of the crisis, firms were able to raise funds quickly when the lockdowns began and cash flow shortfalls emerged. This suggests that lessons from previous crises have helped inform the policy response to the current pandemic.

A large number of published studies suggest that corporate governance could mitigate the negative effects of the health crisis (e.g., [76, 77]). Corporate governance practices are being tested and questioned in the aftermath of the COVID-19 outbreak. When it comes to meeting stakeholder expectations, businesses must make difficult decisions. In this situation, stakeholders would expect management to be quick to adapt and change the firm’s policies and processes. The pandemic, with its heavy toll on both social and financial aspects, has highlighted the importance of societal responsibility. According to Albuquerque et al. [76], firms with high environmental and social (ES) scores experienced lower stock price declines than other firms. This finding highlights how ES policies can help build resilience in the face of the COVID-19 pandemic. Similarly, Broadstock et al. [77] discovered that firms with high ESG (environmental, social, and governance) performance have lower downside risk and are more resilient during turbulent times, particularly during the COVID-19-caused financial crisis. According to the evidence reviewed here, corporate governance may strengthen corporate immunity to the COVID-19 pandemic.

Despite the fact that the COVID-19 shock was global, not all firms were impacted in the same way, and they did not respond in the same way. Firms with a high level of financial flexibility can more easily fund a cash flow shortfall caused by the COVID-19 shock. Furthermore, the uncertainty caused by the COVID-19 pandemic increases stakeholders’ demand for societal responsibility.

5. Conclusion

Pandemics are large-scale infectious disease outbreaks that can significantly increase morbidity and mortality over a wide geographic area. Furthermore, the recent COVID-19 virus outbreak demonstrates how infectious diseases spread quickly in open economies and can jeopardize a country’s economic stability. The impact of the COVID-19 pandemic will be devastating to the global economy, as it has been in previous crises. In comparison to previous crises, COVID-19 differs from other economic shocks in many ways, including the causes and the public policy response. As the pandemic spread, governments around the world halted economic activity, and panic caused by the economic consequences and uncertainty resulted in a stock market crash. Because of technological advancements, news travels faster than ever before, causing more panic and fear of more bad news. The volatility caused by the crisis influenced many investors’ perceptions and behaviors. For higher returns and portfolio diversification, investors turned to alternative investments such as commodities, cryptocurrencies, and foreign exchange. Nonetheless, as the pandemic spread, those alternative investments did not always result in lower downside risk and higher yield.

The pandemic has had an impact on businesses all over the world, but the damage has not been distributed evenly. Certain industries have suffered more than others, and many face an uncertain future. Firms would need to increase liquidity in their businesses as well as maintain good corporate governance in response to the crisis in order to create resilience during the pandemic outbreak.