An Analysis of the Impact of a Pandemic on the Performance of Pharmaceutical Stocks

Abstract

Abstract This research paper investigates the impact of the 2009 H1N1 and Covid-19 pandemics on the returns, volatility, systematic risk and total risk composition of 80 pharmaceutical stocks listed on 11 market indices. Using Bayesian inference and Monte Carlo simulation, the analysis creates an expectation of the potential impact that the Covid-19 pandemic will have on the performance of pharmaceutical stocks. The analysis show a likely increase in stock prices of up to 25% of their values at the start of the pandemic. The results also show that the negative impacts of the pandemic will be realised as increased volatility rather than a decrease in returns. The research makes a methodological contribution to the research on market reaction during pandemics. It also extends the literature on market behaviour during periods of economic uncertainty.