"Good and Bad Investments" in Public Health Stocks Amid the COVID-19 Shock: Evidence from a Transformer-Based Model

Dezhi Zhao¹Yanguo Li^1*Ruitao Gu²

• ¹Yunnan University of Finance and Economics School of Economics, Kunming, China
• ²Yunnan University of Finance and Economics, Kunming, China

Major public health emergencies not only pose serious threats to human health but also profoundly reshape the risk structure and resource allocation logic of capital markets. The market performance of public health-related enterprises during different stages of the pandemic exhibits significant heterogeneity, presenting both substantial risks and potential opportunities, and thus has become a central focus for policymakers and investors alike. Taking the COVID-19 pandemic as the research background, this study selects 55 constituent stocks from the China Securities Index (CSI) Public Health Index as its sample, employs a Transformer model to forecast stock returns, and constructs a long-short investment portfolio. By conducting a stage-wise comparison spanning the pre-pandemic period, the initial outbreak, the normalization phase, and the post-pandemic era, the study reveals the profound impact of public health crises on corporate return structures, risk exposure, and market sensitivity. The findings indicate that during the initial outbreak, capital markets underwent significant structural reshaping, allowing the model to effectively identify excess return signals from healthcare and epidemic-prevention firms, thereby achieving superior investment performance. However, in the mid-pandemic stage, frequent market shifts and industry shocks led to heightened strategy volatility and declining model stability. In the post-pandemic period, with markets returning to rationality, corporate performance increasingly transitioned from being policy-driven to fundamentals-based, and the strategy's screening capability showed signs of recovery. This study systematically uncovers the structural divergence and dynamic evolution of public health-related enterprises throughout the pandemic, conducting empirical analyses across multiple time segments. It expands the interdisciplinary research frontier between public health emergency response and financial risk management and provides both theoretical insights and empirical evidence for investment strategies and policy guidance in the public health sector.