CFA Institute Member Survey Predicts Likely Asset Mispricing due to Impact of COVID-19 on Market Conditions and Government Responses

CFA Institute, the global association of investment management professionals, surveyed its global membership to analyze the effects of the current economic crisis caused by the coronavirus pandemic on the economy, the financial markets, and the investment management industry. The survey found that 96% of CFA charterholders think that the current crisis increases the chance of asset mispricing specifically related to current market conditions. 

“The unique circumstances of a global pandemic, as well as unprecedented swiftness in governments’ responses through fiscal and monetary policy actions, greatly increases the chance of asset mispricing according to our members,” said Margaret Franklin, CFA, President and CEO of CFA Institute. 

In almost equal proportion, respondents indicated that the two reasons this crisis would increase the chance of asset mispricing are: liquidity dislocation (38%) and because governments’ intervention would distort natural market pricing (36%). Respondents in Asia were most concerned with liquidity (45-48%), whereas respondents in North America and Europe showed higher levels of concern about public authorities distorting prices (39%). 

“On public authorities’ intervention, we found in another section of our member survey that respondents are divided on whether aid should be continued to support the recovery or stopped as soon as possible to allow fiscal rigor and free markets to take over,” said Olivier Fines, CFA, Head of Advocacy EMEA for CFA Institute. 

“It is interesting to see from the survey that although a large portion of respondents observed a marked decrease in market liquidity across equities and bond markets, they agree that government and central bank intervention has managed to stabilize markets to a large extent. Analyzing how this aid will be able to subside gradually shall be an interesting spectacle. Essentially, we cannot have it both ways, that is, prices that reflect fundamentals at the same time as authorities stepping in to prevent a market rout – something has to give,” notes Fines. 

The full membership survey, which will be released at a later date, explored:
 The economic situation and the potential recovery;
 The market impact on volatility, liquidity and price formation;
 The interventionism of governments and central banks;
 The regulatory response;
 An overview of ethics in times of crisis;
 The impact of the crisis on the asset management business model and the role of finance;
 Whether the crisis is changing anything to the active versus passive debate; 
 And a preliminary analysis of members’ employment situation. 

The survey was fielded to the global membership of CFA Institute across all regions and jurisdictions where the organization has representation. The survey was sent on 14 April 2020 and closed on 24 April 2020. A total of 167,312 individuals received an invitation to participate. Of those, 13,278 provided a valid answer, for a total response rate of 8%. The margin of error was +/-0.8%.