Health Care Sector

According to both the event study and the random-effects models, the Health Care sector significantly outperformed all other sectors, except Consumer Staples and Technology and Telecommunications.

As evident in Figure 25, the health care sector quickly started recovering from the initial market crash, and in the instance of Norway significantly surpassed its pre-event performance. The Health Care sectors consist of the sub-sectors: Health Care Providers, Medical Equipment and Services, and Pharmaceuticals and

Biotechnology. This sub-section will examine the factors influencing the stock performance in the sub-sectors of the Health Care sector over the event period.

Figure 25 – CAAR over Event Period [-20;80] for the Health Care sectoral indices

The COVID-19 pandemic put the Health Care sector under immense pressure, as the consequences of the pandemic depended on its performance. Therefore, the work of Health Care companies was highly prioritized by governments. Consequently, the core activities of the Health Care sector were not directly disrupted by the restrictions and partial lockdowns. Hence, after adjusting to the new normal of social distancing and working remotely, and after overcoming the initial disruptions in deliveries, the activities of the Health Care sector were generally not significantly affected. However, the failing Health Care systems in other European countries, such as Italy, indicated the importance of national Health Care systems’ capacity and strategic responses.

Therefore, the early stages of the pandemic were characterized by uncertainty on how resilient the Scandinavian Health Care systems would be to a sudden surge of patients. However, as the pandemic progressed and the number of patients increased, it became evident that the Scandinavian Health Care providers had supply shortages due to their limited capacities. The Health Care systems quickly showed their resilience when the initial challenges were overcome.

On the other hand, the Medical Equipment and Services, and Pharmaceuticals and Biotechnology companies were among the winners of the pandemic. The sudden global increase in the number of hospital patients challenged healthcare providers’ capacity and increased the demand for existing and new medical equipment.

In order to treat patients infected with the coronavirus, Health Care providers needed a larger capacity of all medical equipment, especially respirators. Moreover, as the development of the pandemic was uncertain, Health Care providers needed to prepare for possible unexpected increases in patients, which further increased the demand for medical equipment. Furthermore, to control the spread of the virus, governments and private Health Care providers demanded extensive amounts of testing kits to diagnose COVID-19. Lastly, as protection from the virus, the demand for medical masks and sanitizers increased significantly from private consumers and companies. Hence, the pandemic has for the Medical Equipment and Services sub-sector been

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Health Care CAAR

Denmark Norway Sweden

characterized by a significant increase in demand. Thus, the main challenge for the Medical Equipment and Services sector has been to fulfill the demand of the market in a time of supply shortages and uncertainty.

The global desire to end the pandemic placed the Pharmaceuticals and Biotechnology sector under significant pressure due to the high demand for fast new information and treatments regarding COVID-19. Hereunder, governments worldwide pledged vast amounts to the research and treatment of COVID-19 and, most importantly, developing a vaccine. Given the acute need for a COVID-19 vaccine and the continued uncertainties regarding the disease, the circumstances of the vaccine production were not traditional. Firstly, historically producing a new vaccine has taken between 5 and 10 years (NC State University, 2020). The COVID-19 vaccine production had to be significantly faster, as the need for the vaccine was acute. Secondly, the vaccine is needed for almost the world’s population, making it difficult for companies to avoid shortages.

Given the circumstances of the vaccine production, investing in the COVID-19 vaccine was a high risk, as the success of the vaccine was not guaranteed. Therefore, the vaccine-producing companies collaborated both with investors and governments. Considering the size of the market for COVID-19 treatments and the value-added in the case of successful treatment, private investors started investing in stocks of vaccine-producing companies. Therefore, Pharmaceutical and Biotechnology companies involved in developing the vaccine have experienced a significant increase in stock price, including, for instance, the Norwegian firm ArcticZymes Technologies and the British-Swedish firm AstraZeneca. Hence, the Pharmaceutical and Biotechnology sector performed well on the Scandinavian stock market over the event period due to the increased global demand for existing and new medical treatments and equipment.

Hence, given the resilience of the Scandinavian health care companies, after the initial scare it became evident for investors that the pandemic would not have severe consequences for the sector. Moreover, as the demand shifted for the products and services of the sector, it became evident that the Scandinavian Health Care sector benefitted from the COVID-19 induced circumstances. Therefore, investors allowed this sector to recover the initial return decrease induced by fear and uncertainty.

Furthermore, as the treatments of COVID-19 have been prioritized during the pandemic, other treatments and operations have been postponed. Moreover, the long-term effects of COVID-19 indicate increases in other health issues in the future. Therefore, the increased demand for Health Care products, services and research is also expected to continue after the pandemic. Lastly, it should be noted that the significantly better performance in Norway, can be due to both the characteristics of the pandemic in Norway and the sector composition, as several Norwegian companies are contributing to the vaccine production.