Resilience and Asset Pricing in COVID-19 Disaster

The COVID-19 pandemic potentially affected stock prices in two non-mutually exclusive ways: discount rates and cash flows. This paper focuses on the latter and analyzes it through the lens of an asset-pricing model. It shows how workplace resilience and financial resilience interacted and significantly affected asset prices. The model-based equity premium increases with the probability of a disaster. The results suggest the significant amplification of workplace resilience by financial resilience. Specifically, the dividend growth of low-resilience firms is significantly more responsive to workplace flexibility and suffers more severely than that of high-resilience firms.