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Tests of the Fama-French five-factor model in the US stock market under the COVID-19 pandemic

In: Proceedings of the 2023 2nd International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2023)

Author

Listed:
  • Meng Gao

    (Beijing Normal University - Hong Kong Baptist University United International College, Faculty of Sicence and Technology)

Abstract

At the end of 2019, the COVID-19 spread widely around the world, leading to a global economic recession. The data for this article is taken from a database created by Kenneth R. French. Given that the COVID-19 pandemic was widespread in the United States in March 2020 and remained stable through February 2023. In this paper, multiple linear regression method is adopted to conduct empirical analysis and test on the Fama-French five-factor model, and explore the explanatory strength of the five-factor model on the US stock market before and after the epidemic. The results showed that the volatility and average return of the market increased significantly after the epidemic. The epidemic enhanced the market value effect, and also enhanced the explanatory power of the profit factor and investment style factor.

Suggested Citation

  • Meng Gao, 2024. "Tests of the Fama-French five-factor model in the US stock market under the COVID-19 pandemic," Advances in Economics, Business and Management Research, in: Faruk Balli & Hui Nee Au Yong & Sikandar Ali Qalati & Ziqiang Zeng (ed.), Proceedings of the 2023 2nd International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2023), pages 221-226, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-268-2_26
    DOI: 10.2991/978-94-6463-268-2_26
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