Abstract
The SARS pandemic slowed down household income growth and negatively impacted the financial market. This paper extends the asset pricing literature by providing a new channel to explain the impact of the pandemic on asset prices. First, we propose an income-featuring consumption-based capital asset pricing model (IF-CAPM). Second, the empirical tests show that the IF-CAPM successfully captures structural changes brought about by the SARS pandemic on the financial market and the model performs better than the traditional CAPM.
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