TY - JOUR
T1 - Understanding mispricing in the travel and leisure industry
AU - Narayan, Paresh Kumar
AU - Sharma, Susan Sunila
N1 - Publisher Copyright:
© 2023 The Authors
PY - 2023/11
Y1 - 2023/11
N2 - In this paper, we show that the travel and leisure industry prices for 18 countries cannot be explained by conventional market risk factors. We, in other words, document significant evidence of mispricing, which increased exponentially due to the COVID-19 pandemic. We empirically show that COVID-19 related news, led by travel-related news, and COVID-19 support indices influenced industry mispricing. Trading on this mispricing is found to be economically significant for investors, who, by buying when prices are undervalued and selling when overvalued, can make annualized profits in the 3.11–25.02% range, depending on the country. These results are robust not only to different risk factors and subsamples, but also to the COVID-19 pandemic. Our findings have implications for travel industry stakeholders, policy makers, and investors.
AB - In this paper, we show that the travel and leisure industry prices for 18 countries cannot be explained by conventional market risk factors. We, in other words, document significant evidence of mispricing, which increased exponentially due to the COVID-19 pandemic. We empirically show that COVID-19 related news, led by travel-related news, and COVID-19 support indices influenced industry mispricing. Trading on this mispricing is found to be economically significant for investors, who, by buying when prices are undervalued and selling when overvalued, can make annualized profits in the 3.11–25.02% range, depending on the country. These results are robust not only to different risk factors and subsamples, but also to the COVID-19 pandemic. Our findings have implications for travel industry stakeholders, policy makers, and investors.
KW - Investors
KW - Leisure
KW - Mispricing
KW - Pandemic
KW - Risk
KW - Travel
UR - http://www.scopus.com/inward/record.url?scp=85167578249&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2023.102869
DO - 10.1016/j.irfa.2023.102869
M3 - Article
AN - SCOPUS:85167578249
SN - 1057-5219
VL - 90
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 102869
ER -