Portfolio Management During Epidemics: The Case of SARS in China

Abstract

This paper assessed the impact of Severe Acute Respiratory Syndrome (SARS) on China’s stock market. Our results indicated that the Chinese stock market reacted rapidly to the SARS epidemic. We provide strong empirical evidence that the epidemic had an immediate impact on the pharmaceutical and tourism industries. Pharmaceutical companies particularly benefited from the outbreak of SARS, while the tourism sector was adversely affected. Our results imply the existence of a profitable trading rule during an epidemic.