Analysis of COVID-19 on Service Industry Based on Fama and French Five-Factor Model

Liu, Shijing

doi:10.1109/msieid52046.2020.00035

Cited by 8 publications

(8 citation statements)

References 15 publications

(16 reference statements)

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“…Most previous studies have focused on the effects of COVID-19 on single industries. Liu has conducted a study on the stock market in the service industry in the United States by applying the Fama-French Five-Factor model to examine the performance of the service industry before and after the outbreak of the COVID-19 [2]. In Liu's research, he aimed to analyze the estimated coefficients and t-statistics of the five-factor factors to evaluate the service industry's performance using the Kenneth R. French Data Library dataset.…”

Section: Related Researchmentioning

confidence: 99%

Covid-19's Impact on the U.S. Stock Market based on Fama-Frech Multi-factors Model

Zhao¹

2022

BCPBM

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Since COVID-19 outbreak in 2019 has hugely impacted the global economy, influencing the U.S. stock market. Many industries went through the shutdown, heavy loss, and bankruptcy. During this challenging period, investors suffered from tremendous stresses of financial risk and sought to use the capital asset pricing model to evaluate different stock portfolios. This article is designed to help them find an effective investment method to gain more return in the U.S. stock market. The daily 49 Industry Portfolios datasets used in this research are from Kenneth R. French Data Library and were selected the date from 2000, January 1st to 2021, December 31st, and equally divided into three periods, before the COVID-19 period, during the COVID-19 period, and after the first Pfizer vaccine authorized. Based on the CAPM model, the Fama-French Five-Factor model can better explain the excess return in the U.S. stock market. This article uses the method of multiple linear regression to process the dataset and adopt the Fama-French Five-Factor model to analyze the change in significance and coefficient of five factors. By analyzing the number of anomalies in 49 industries, the result shows that anomalies decreased from 26 to 6 industries, indicating that the Fama-French Five-Factor model has a good explanation for excess return. As for the coefficient change of five factors, the coefficient of market portfolio return (MKT) is close to 1, which means the power of explanation becomes stronger. The coefficient of Small Minus Big Size (SMB) slightly changed but is larger than 0, indicating small-cap firms have better performance than large-cap ones. High Minus Low B/M (HML), Robust Minus Weak Operating Profitability (RMW), and Conservative Minus Aggressive investment (CMA)becomes an insignificant factor. Therefore, the factors HML, RMW, and CMA would not be appropriate to consider as practical investment methods for investors.

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Section: Related Researchmentioning

confidence: 99%

Covid-19's Impact on the U.S. Stock Market based on Fama-Frech Multi-factors Model

Zhao¹

2022

BCPBM

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“…In addition, the result also shows that businesses with aggressive investments are associated with returns. Large corporations perform better than small-scale businesses [10].…”

Section: Related Researchmentioning

confidence: 99%

Research of Impact of COVID-19 on Clothing Industry Using Fama-French Five-Factor Model

Ji¹,

Li²,

Yu³

2021

Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)

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As COVID-19 negatively affected the U.S. stock market, the performances of stocks vary from different industries. This research focused on the specific impact of the pandemic on the clothing industry specifically. The study used the Fama-French 5 factor model, which includes two other variables -RMW and CMA based on the Fama-French 3 factor model, including factors of return on the market, size of firms, and book-to-market values, to get the performance of stocks of the clothing industry. The data from a time before COVID-19, which was January 2019, to time during the pandemic, March 2021, is obtained from Kenneth R. French Data Library. The two sets, which are before and during the pandemic, of coefficients of all the five factors and 𝑅 𝑖 − 𝑅 𝑓 are calculated using the model and compared with each other. The results show the change in the significance of three factors: value, profitability, and investment, which suggests that the performance of companies in the clothing industry is related to those three variables. In conclusion, investors should be careful with firms with low book-to-market ratios and those with low investments. Additionally, investors need to be cautious with firms that have robust profitability.

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“…The market model estimation in COVID-19 context is treated in recent research works. We can cite Diaz et al (2021) and Liu (2020) among others. The modeling approach that we propose in this article can also be applied in this context because it allows exploiting the information available at high frequency and using monthly time series of macroeconomic variables in the multifactor model estimation.…”

Section: Introductionmentioning

confidence: 99%

A fuzzy multifactor asset pricing model

Moussa

Kamdem

2021

Ann Oper Res

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This paper introduces a new approach of multifactor asset pricing model estimation. This approach assumes that the monthly returns of financial assets are fuzzy random variables and estimates the multifactor asset pricing model as a fuzzy linear model. The fuzzy random representations allows us to incorporate bias on prices induced by the market microstructure noise and to reflect the intra-period activity in the analysis. The application of fuzzy linear regression enables the uncertainty assessment in an alternative way to confidence interval or hypothesis testing, which is subjected the binding assumption of normal distribution of returns. However, it is well known that the distribution of many asset returns deviates significantly from the normal assumption. We illustrate this estimation in the particular case of the Fama and French's (J Financ Econ 33:3-56, 1993) three factor model. Finally, empirical studies based on Fama and French's portfolios and risk factors, historical dataset highlight the effectiveness of our estimation method and a comparative analysis with the ordinary least square estimation shows its ability to be applied for an optimal decision decision making in the financial market.

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Analysis of COVID-19 on Service Industry Based on Fama and French Five-Factor Model

Cited by 8 publications

References 15 publications

Covid-19's Impact on the U.S. Stock Market based on Fama-Frech Multi-factors Model

Covid-19's Impact on the U.S. Stock Market based on Fama-Frech Multi-factors Model

Research of Impact of COVID-19 on Clothing Industry Using Fama-French Five-Factor Model

A fuzzy multifactor asset pricing model

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