The economic impact produced by the pandemic has been something new in modern times and continues to play out around the world. Real GDP fell 11% in the U.S., and the IMF forecasts that global output saw its most significant recorded drop in 2020. Considerable shifts in labor and technology allocation have taken place, producing many corporate winners alongside steep layoffs and bankruptcies.

Early in 2020, as the pandemic came to light, investors were presented with an array of news about the crisis' likely impact. Analysts of all stripes gave opinions about markets and companies, producing various analyses and investment strategies to maximize pandemic returns and minimize damage. Given the unprecedented nature of the crisis, most of the analysis was speculative, of course. Most investors assumed the COVID-19 was terra incognita to be navigated as events unfolded. New research from Steven J. Davis (Chicago Booth), Stephen Hansen (Imperial College London), and Cristhian Seminario-Amez (Chicago) suggest an alternate reading of that conclusion. 

Their recently published research looked at what companies had said publicly about their own risk exposures before the pandemic in their SEC 10K filings. These documents are serious matters, because companies can face significant legal and financial penalties for not disclosing material risks to regulators and investors. The researchers wondered whether information contained in the 10K's Risk Factors(RF)section could have been used to predict how COVID-19 would affect the company's performance in the crisis.