An Analysis and Comparison of Multi-Factor Asset Pricing Model Performance during Pandemic Situations in Developed and Emerging Markets

Konstantin B. Kostin, Philippe Runge and Michel Charifzadeh
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Konstantin B. Kostin: Department of Economics and Finance, Saint-Petersburg State University of Economics, 191023 St. Petersburg, Russia
Philippe Runge: Graduate School, Nordakademie, 22767 Hamburg, Germany
Michel Charifzadeh: ESB Business School, Reutlingen University, 72762 Reutlingen, Germany

Mathematics, 2022, vol. 10, issue 1, 1-16

Abstract: This study empirically analyzes and compares return data from developed and emerging market data based on the Fama French five-factor model and compares it to previous results from the Fama French three-factor model by Kostin, Runge and Adams (2021). It researches whether the addition of the profitability and investment pattern factors show superior results in the assessment of emerging markets during the COVID-19 pandemic compared to developed markets. We use panel data covering eight indices of developed and emerging countries as well as a selection of eight companies from these markets, covering a period from 2000 to 2020. Our findings suggest that emerging markets do not generally outperform developed markets. The results underscore the need to reconsider the assumption that adding more factors to regression models automatically yields results that are more reliable. Our study contributes to the extant literature by broadening this research area. It is the first study to compare the performance of the Fama French three-factor model and the Fama French five-factor model in the cost of equity calculation for developed and emerging countries during the COVID-19 pandemic and other crisis events of the past two decades.

Keywords: Fama French five-factor model; COVID-19; pandemic; crisis; capital asset pricing; cost of equity investment; developed; emerging (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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