COVID-19 as a Model for Market Adaptivity to the New Cases in a Pandemic

Looking back at 2020’s financial performance, we can see that the COVID-19 pandemic severely disrupted both the global economy and the securities markets. Due to this importance, a large number of people have followed the development of the pandemic based on statistics on the number of new cases. The first works proved that the increase in the number of cases negatively affects the profitability of the securities market. However, the recovery and return to growth of profitability began to be observed even before any quarantine restrictions were lifted and long before the initiation of mass-vaccination (the ‘cure’ so to speak). As such, we must ask at what point the markets stopped responding to the increase in the number of cases. This work considers precisely the issue of market adaptation to the negative factor of increasing number of cases. To obtain the results, the model Value at Risk will be implemented to examine the differences between the risk of returns ‘affected by disease’ and the risk of returns ‘adjusted to the impact of COVID-19’.