Capital markets and perceptions of sectoral sensitivity to COVID-19

Abstract

This article analyzes the performance of industry sub-indices during the COVID-19 pandemic, done on the basis of the evolution of rates of return for 247 industry indices from 15 European countries in 2020. Differences between the achieved rates of return on industry and the main stock indices in all examined countries were estimated. Additionally, the volatility of individual sector indices over was calculated. This allows us to draw the following conclusions. Firstly, investors considered tourism and the oil and gas and financial sectors to be among industries most vulnerable to COVID-19. Secondly, the need to transfer business to the Internet and to accelerate digital transformation are prerequisites for investors’ decisions to increase the share of technology companies in their portfolios. On the other hand, growing uncertainty is impacting the performance of providers of food and other necessities. Due to administrative constraints put on tourism and passenger transport activities, demand for leisure goods increased rapidly, which translated into results and quotations of the entities responsible for their production. The pandemic crisis, contrary to symptoms observed in Q1 2020 and analysts’ expectations, did not adversely affect industrial production. Finally, in general, the behavior of investors in the Russian market was similar to that of investors in other economies. However, for the three sub-sectors, the reaction of investors was different.