change in the sectoral structure of the American stock market due to COVID-19 as an additional risk factor
by Aleksei Kirilov & Valeriy Kirilov The events in the US stock market in the first half of 2020 provide a unique opportunity to study the dynamic characteristics of the market. This strong and sharp decline and subsequent highly uneven recovery provided a resilience test of risk management approaches for many investors and lenders. This article examines the dynamics of changes in sectoral structure of the stock market due to the COVID-19 pandemic. An understanding of the prospects for the development of a particular industry is necessary for both investors and lenders in order to correctly assess investment risk and risk of lending to a company from this industry. This article is to some extent a continuation of the study of the American stock market, which we began in [1] and [2]. Note that earlier we had predicted the market correction for March - April 2020, see [2]. But the pandemic has brought this correction closer and much stronger. To compare the behavior of stocks of various companies, we used the dimensionless value of the relative weight of these companies in the S&P 500 index. To do this, we used the ratio of the company’s daily share price to the value of the S&P500 index. Then the results were normalized to the value of the company’s weight in the index, which was on February 19, 2020. This is the date of the maximum rise of the market before the fall. Thus, it is possible to analyze the change in the weight of the company in the index, i.e. compare the change in the capitalization of a given company with the behavior of the entire market. For calculations, the data of the service https://finance.yahoo.com were used from January 1, 2020 to September 30, 2020 inclusive. Consider the dynamics of shares in consumer sector companies (FMCG) using the example of CL, KMB and PG. Fig. 1 shows the graphs of changes in the weight of these companies and there is also a graph of changes in the S&P 500.
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Intelligent Risk - November 2020
