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

Niall O’Donnell , Darren Shannon, Barry Sheehan, Badar Ashraf

Research output: Contribution to journalArticlepeer-review

1 Downloads (Pure)

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.
Original languageEnglish
Article number98
Number of pages31
JournalInternational Journal of Financial Studies
Volume12
Issue number4
DOIs
Publication statusPublished - 3 Oct 2024

Cite this