The microstructure of fear, the Fama–French factors and the global financial crisis of 2007 and 2008

Lim, Dominic; Durand, Robert B.; Yang, Joey

doi:10.1016/j.gfj.2014.10.001

Cited by 12 publications

(12 citation statements)

References 23 publications

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“…It causes investors to carry out efficient portfolio formation strategies to obtain satisfactory returns. As with the global economic crisis in 1998 and the 2007 exchange rate crisis, Lim et al (2014) found the same result. Thus, the US-China trade war event increases the positive influence of market risk on yields.…”

Section: Market Risk and Portfolio Performancesupporting

confidence: 56%

“…The evidence of the 5FF model in crisis was carried out by Lim et al (2014). He found that during the 2008 crisis (Crisis 2), the SMB and HML factors had a negative effect on portfolio returns.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Wijaya et al (2017) show that companies with small market capitalization have a greater risk of growth than those with a greater rate of return, supported by Wijaya et al (2017). Lim et al (2014) also examine the impact of the global financial crisis on the Fama-French portfolio, and the results find that the 2007-2008 crisis caused the SMB standard deviation to increase significantly, accompanied by a significant decrease in returns.…”

Section: Market Risk and Portfolio Performancementioning

confidence: 99%

“…It is the reason that 5FF is used more often nowadays. The 5FF model has been tested for its performance in times of crisis by Lim et al (2014), who found that during the 2008 crisis (Crisis 2), the small minus big (SMB) and high minus low (HML) factors had a negative effect on portfolio returns. Meanwhile, during the first crisis in 2007, SMB and HML had increased.…”

Section: Introductionmentioning

confidence: 99%

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The Fama-French five-factor model and the US-China trade war: An empirical investigation of the Indonesia, US, and China stock market

Elizabeth,

Sulistiawan,

Grigorescu

2022

JEMA

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Despite numerous studies of the US and China trade war effect being published over the last seven years, this topic has remained equivocal. The portfolio formation model that underlies the arbitrage pricing theory is still relatively small, especially for the portfolio performance of the Fama-French five factors (5FF) model that examines the global economic crisis. Focusing on the trade war year, the study aims to examine the effect of accounting information on portfolio performance by using the 5FF model. This study employs a dummy panel least square regression model, the data are analyzed from Indonesia, US, and China stock markets with 864 portfolio monthly combinations ranging from 2016 to 2019. The result of the study shows that the US-China trade war strengthens the beneficial impact of market risk on portfolio performance in the Indonesian Stock Exchange. On the other hand, the war has no impact on the relationship between market risk and the performance of a portfolio of US stocks. However, it lowered the beneficial impact of size on portfolio performance for both the US and China stock markets. The robust 5FF of accounting information within the study is size and investment. According to the study, systematic risk and idiosyncratic risk should be given more consideration by both investors and companies to prevent unneeded economic losses and manage the risk that could have a greater impact on the stock market.

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Section: Market Risk and Portfolio Performancesupporting

confidence: 56%

Section: Literature Reviewmentioning

confidence: 99%

Section: Market Risk and Portfolio Performancementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The Fama-French five-factor model and the US-China trade war: An empirical investigation of the Indonesia, US, and China stock market

Elizabeth,

Sulistiawan,

Grigorescu

2022

JEMA

View full text Add to dashboard Cite

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“…Corredor et al (2013) show that this sentiment measure has a significant influence on returns across markets, while Tsai (2014) reports that information transmission between stock markets in developed countries is highly correlated with VIX. Lim et al (2014) note that stock market returns are increasingly sensitive to changes in VIX during the financial crisis of 2008-09. One explanation for this is offered by Smales (2014) who finds that investor fear is negatively related to the sentiment of newswire messages.…”

Section: Introductionmentioning

confidence: 99%

Risk-on/Risk-off: Financial market response to investor fear

Smales

2016

Finance Research Letters

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This article examines the relationship between changes in the level of investor fear (measured by VIX) and financial market returns. We document a statistically significant relationship, across asset classes, consistent with a flight to quality as investor fear increases. As VIX increase there is a decline in stock markets, bond yields, and high-yielding currencies (AUD and NZD), while the USD appreciates. Returns become more sensitive to changes in the level of investor fear during the financial crisis of 2008-09, when investor fear spikes sharply. Analysis of market returns subsequent to periods of extreme levels of investor fear suggests some predictive ability for future returns, and it is suggested that this may be used to develop a profitable trading strategy. Taken together, the results confirm that financial market returns are closely related to prevailing levels of investor fear.

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Does OPEC news sentiment influence stock returns of energy firms in the United States?

Gupta

Banerjee

2019

Energy Economics

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The microstructure of fear, the Fama–French factors and the global financial crisis of 2007 and 2008

Cited by 12 publications

References 23 publications

The Fama-French five-factor model and the US-China trade war: An empirical investigation of the Indonesia, US, and China stock market

The Fama-French five-factor model and the US-China trade war: An empirical investigation of the Indonesia, US, and China stock market

Risk-on/Risk-off: Financial market response to investor fear

Does OPEC news sentiment influence stock returns of energy firms in the United States?

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