Which companies are most immune to the pandemic?

WITH MANY young and healthy people falling victim to covid-19, it can sometimes seem as if the disease strikes indiscriminately. The truth, of course, is that some people are more vulnerable to the virus than others. So too with firms. As the pandemic swept across the globe, investors responded by dumping shares of weaker companies, and those most exposed to the virus. Few sectors were spared entirely in the market rout, but new research suggests that some companies enjoyed stronger immunity than others.

A working paper published this week by economists at the University of Hong Kong, the Chinese University of Hong Kong and the University of California, Berkeley examines which characteristics were most beneficial, and most harmful, during the stockmarket sell-off up to March 27th. Using data from more than 6,000 publicly traded firms across 56 countries, the authors found that, as is to be expected, companies in countries with greater exposure to the pandemic, as measured by confirmed cases of covid-19, suffered more than those in less-affected countries (see chart). Supply chains mattered, too. Firms with networks of suppliers and customers located in hard-hit places also experienced larger share-price declines.