Does sustainable competitive advantage make a difference in stock performance during the Covid-19 pandemic?

https://doi.org/10.1016/j.frl.2022.102893Get rights and content

Highlights

  • Firms with sustainable competitive advantage significantly outperform others during the Covid-19 pandemic.

  • Wide-moat is positively priced by the stock market during the Covid-19 pandemic.

  • Wide-moat firms are associated with positive cumulative abnormal returns after the advent of the Covid-19 pandemic.

Abstract

Although firms with sustainable competitive advantage do not yield superior returns in regular years, these firms significantly outperform others during the Covid-19 pandemic. Empirical evidence shows that wide-moat is positively priced by the stock market during the pandemic, which is not the case in the pre-pandemic period. Furthermore, wide-moat firms can generate positive cumulative abnormal returns after the advent of the Covid-19 pandemic. However, the magnitude wanes down as time expands into the future.

Keywords

Sustainable competitive advantage
Stock returns
Covid-19 pandemic

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