An Empirical Study on the Industry-Specific Impact of Covid-19 on U.S. Stock Market—Based on the Fama-French Five Factor Model

Kezhen Li ()
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Kezhen Li: University College London

A chapter in Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024), 2025, pp 240-251 from Springer

Abstract: Abstract This paper investigates the impacts of the COVID-19 pandemic on diverse sectors within the U.S. stock market, utilizing the Fama-French five-factor model as the analytical framework. The explanatory power of the model under extreme market conditions is assessed by analyzing stock returns for 49 industries before, during and after the pandemic. The paper focuses on the differential performance of the paper and biotechnology industries in response to the pandemic shock, revealing some key anomalies and patterns in stock performance. The results show that while the returns of most industries are largely explained by the model, the paper industry exhibits unusual volatility during the pandemic, mainly due to the accelerating trend of digitization and changes in consumer behavior. In addition, the CMA (Conservative Minus Aggressive) factor became increasingly significant during the pandemic, especially for high capital investment biotech companies that experienced lower returns due to high investment and low success rates. These findings highlight the limitations of traditional asset pricing models in explaining the complexity of industry dynamics during global outbreaks and can serve as a reference for investors the next time they encounter a similar black swan event.

Keywords: Covid-19; Fama-French Five Factor Model; Paper industry; CMA (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-652-9_25

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DOI: 10.2991/978-94-6463-652-9_25

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