Yield and Volatility of Service Industry in Long-term Uncertain Market: a Post-pandemic Era Perspective

Abstract

The service industry, where hotels, restaurants, and tourism have experienced a cliff-like decline due to the Covid-19 pandemic. This paper evaluates the impact in both China and oversea situations on service industries. We build a VAR model to analyze the changes in returns and the ARMA-GARCH model which analyzes the changes in volatility in these service industries. This paper focuses on previous stock returns to predict the future influence of volatility in hotel, tourism, and catering industries. It finds out that pandemic outbreaks have a negative influence on service industry’s rate of return in both the short term and long term as the epidemic gradually normalizes. Therefore, if service industry wants to have a sustainable return, it must come up with new business models to attract customers both in person and online. In addition, market advertising and improving consumer experiences also play important roles since now a lot of young consumers care much about their living experiences.