Fama French Three Factor Model in Chinese Stock Market during Covid-19

Ningrong Cai (), Danqing Song, Yiqing Zhang and Zhuoqun Zhang
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Ningrong Cai: University College London, Department of Statistical Science
Danqing Song: Department of Economics, London School of Economics and Political Science
Yiqing Zhang: Department of Economics, London School of Economics and Political Science
Zhuoqun Zhang: Tianjin Foreign Studies University, School of International Business

A chapter in Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2022), 2022, pp 581-592 from Springer

Abstract: Abstract Many papers in the empirical finance literature examine the Fama-French three-factor model of stock returns in different markets. This paper applied the three-factor model to the Chinese stock market in the Covid-19 specific period and made a comparison with the pre-Covid model application to distinguish the impact of a pandemic shock on the model. Factors under the cross-sectional regression model become less significant during the shock and hence this paper further provides a possible improvement on the model under the shock by adding the stock market’s expectation of volatility as a proxy of market anticipation. The empirical results indicate that the additional factor added is significantly negatively associated with the stock return. As a whole, results are reasonably consistent with the Fama-French three-factor model.

Keywords: Fama French Three Factor Model; Chinese Stock Market; VIX; Covid-19 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-052-7_68

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DOI: 10.2991/978-94-6463-052-7_68

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