Working paper series pandemics , vaccines and corporate earnings

We estimate a model of damage to corporate earnings from COVID-19. A pandemic decreases earnings due to costly mitigation and lower growth rates. The arrival of a vaccine, modeled as a Poisson process, reverts earnings to normal. We t our model to timely measures of expected damage given by revisions of industry-level consensus earnings forecasts. In mid-May 2020, a vaccine is expected to return earnings to normal in one year. Levered and face-to-face industries will benefit the most from a vaccine. We then extend our framework to account for time-varying vaccine arrival rates. August 2020 forecasts imply a return to normal in six months, consistent with good news on the effectiveness of multiple vaccines announced in November 2020. Harrison Hong Department of Economics Columbia University 1022 International Affairs Building Mail Code 3308 420 West 118th Street New York, NY 10027 and NBER hh2679@columbia.edu Jeffrey D. Kubik Maxwell School Syracuse University 426 Eggers Hall Syracuse, NY 13244 jdkubik@maxwell.syr.edu Neng Wang Columbia Business School 3022 Broadway, Uris Hall 812 New York, NY 10027 and NBER nw2128@columbia.edu Xiao Xu x.xiao@columbia.edu Jinqiang Yang Shanghai University of Finance and Economics Guoding Rd. 777 Shanghai, 200433 China yang.jinqiang@mail.sufe.edu.cn