Abstract
This paper attempts to apply the Fama-French Five-Factor model to conduct a statistical study on the US stock market under the COVID-19 pandemic, evaluating the changes in the American stock market before and during the pandemic, in order to fully evaluate the applicability of this model. The research used data of Fama-French five research factors from 49 industries collected from the Kenneth R. French-Data Library during the period from May 1, 2019 to December 31, 2020, and all the statistic processing work are conducted with functions. In this study, data have been divided into two groups according to time, regarding May 1, 2019 to February 28, 2020 as the pre-pandemic stage of the study and March 1, 2020 to December 31, 2020 as the post-pandemic stage of the study. After multiple linear regression, the coefficients of the five factors of the 49 industries before and during the pandemic were obtained, and the excess returns(gain/loss), the significance changes and positive and negative changes of the five factors were further counted. According to the results, this study assessed the extent to which each factor was affected by the pandemic and collected a large amount of data to explain the anomalous industries. In addition, industries with significance changes or positive and negative changes of five factors were also be qualitatively analyzed. Meanwhile, this study compared the Mean Adjusted R-Square of the model before and during the pandemic to compare the fitting degree. In this research, it can be concluded that the Fama-French Five-Factor model has a better fitting degree for the American stock market during than before the pandemic. It’s reasonable to apply this model in US stock market to find anomalies, as well as to determine the factors that need to be considered when investing in various industries, so as to decide the investment style that needs to be adopted during the pandemic.
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Notes
- 1.
The data in this paragraph were collected from Nasdaq official website.
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Zhang, S. (2022). Research on the Application of Fama-French Five-Factor Model in American Stock Market Before and During the COVID-19 Pandemic. In: Li, X., Yuan, C., Kent, J. (eds) Proceedings of the 5th International Conference on Economic Management and Green Development. Applied Economics and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-19-0564-3_39
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