The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics
This analysis investigates the performance and underlying dynamics of the Fama–French Five-Factor Model (FF5M) in the context of the COVID-19 pandemic, exploring its implications on the U.S. stock market across 30 industries. Our findings reveal marked shifts in the significance of factors. The SMB...
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| Format: | Article |
| Language: | English |
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MDPI AG
2024-10-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/12/4/98 |
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| author | Niall O’Donnell Darren Shannon Barry Sheehan Badar Nadeem Ashraf |
| author_facet | Niall O’Donnell Darren Shannon Barry Sheehan Badar Nadeem Ashraf |
| author_sort | Niall O’Donnell |
| collection | DOAJ |
| description | This analysis investigates the performance and underlying dynamics of the Fama–French Five-Factor Model (FF5M) in the context of the COVID-19 pandemic, exploring its implications on the U.S. stock market across 30 industries. Our findings reveal marked shifts in the significance of factors. The SMB (size) gained in strength, while the HML (value) factor rose and fell in response to shifting flight-to-quality, liquidity, and inflation concerns. Both the RMW (profitability) and CMA (investment) factors saw a decline in their overall significance during the pandemic. Our results illustrate the oscillation of investor preferences from 2018 to 2023, capturing three distinct periods: pre-COVID-19, COVID-19, and post-COVID-19. |
| format | Article |
| id | doaj-art-da7be4ce666b4b3d93ce0e5ec5f70cb1 |
| institution | Kabale University |
| issn | 2227-7072 |
| language | English |
| publishDate | 2024-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-da7be4ce666b4b3d93ce0e5ec5f70cb12024-12-27T14:29:56ZengMDPI AGInternational Journal of Financial Studies2227-70722024-10-011249810.3390/ijfs12040098The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry DynamicsNiall O’Donnell0Darren Shannon1Barry Sheehan2Badar Nadeem Ashraf3Kemmy Business School, University of Limerick, V94 PH93 Limerick, IrelandKemmy Business School, University of Limerick, V94 PH93 Limerick, IrelandKemmy Business School, University of Limerick, V94 PH93 Limerick, IrelandLSBU Business School, London South Bank University, London SE1 0AN, UKThis analysis investigates the performance and underlying dynamics of the Fama–French Five-Factor Model (FF5M) in the context of the COVID-19 pandemic, exploring its implications on the U.S. stock market across 30 industries. Our findings reveal marked shifts in the significance of factors. The SMB (size) gained in strength, while the HML (value) factor rose and fell in response to shifting flight-to-quality, liquidity, and inflation concerns. Both the RMW (profitability) and CMA (investment) factors saw a decline in their overall significance during the pandemic. Our results illustrate the oscillation of investor preferences from 2018 to 2023, capturing three distinct periods: pre-COVID-19, COVID-19, and post-COVID-19.https://www.mdpi.com/2227-7072/12/4/98COVID-19investor preferencesequitiesFama–Frenchrisk factorscrises |
| spellingShingle | Niall O’Donnell Darren Shannon Barry Sheehan Badar Nadeem Ashraf The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics International Journal of Financial Studies COVID-19 investor preferences equities Fama–French risk factors crises |
| title | The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics |
| title_full | The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics |
| title_fullStr | The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics |
| title_full_unstemmed | The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics |
| title_short | The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics |
| title_sort | impact of covid 19 on the fama french five factor model unmasking industry dynamics |
| topic | COVID-19 investor preferences equities Fama–French risk factors crises |
| url | https://www.mdpi.com/2227-7072/12/4/98 |
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