The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics

Niall O’Donnell, Darren Shannon (), Barry Sheehan and Badar Nadeem Ashraf
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Niall O’Donnell: Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland
Darren Shannon: Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland
Barry Sheehan: Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland

IJFS, 2024, vol. 12, issue 4, 1-31

Abstract: 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.

Keywords: COVID-19; investor preferences; equities; Fama–French; risk factors; crises; industrial finance (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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