On equity market inefficiency during the COVID-19 pandemic

Robert Navratil, Stephen Taylor, Jan Vecer

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


We show that during the weeks following the initiation of the COVID-19 pandemic, the United States equity market was inefficient. This is demonstrated by showing that utility maximizing agents over the time period ranging from mid-February to late March 2020 can generate statistically significant profits by utilizing only historical price and virus related data to forecast future equity ETF returns. We generalize Merton's optimal portfolio problem using a novel method based upon a likelihood ratio in order to construct a dynamic trading strategy for utility maximizing agents. These strategies are shown to have statistically significant profitability and strong risk and performance statistics during the COVID-19 time-frame.

Original languageEnglish (US)
Article number101820
JournalInternational Review of Financial Analysis
StatePublished - Oct 2021

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Efficient market hypothesis
  • Merton's optimal portfolio
  • Utility maximization


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