Examination of U.S. Finance-Related Industry Under COVID-19 Based on Fama-French model

Yuhan Cai; Yue Shen; Ting Wang; Tianning Xie

doi:10.2991/assehr.k.211209.192

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Examination of U.S. Finance-Related Industry Under COVID-19 Based on Fama-French model

Authors

Yuhan Cai¹^{, †}, Yue Shen²^{, †}, Ting Wang³^{, †}, Tianning Xie⁴^{, *}^{, †}

¹Business school, University of Nottingham, Nottingham NG8 1BB, United Kingdom

²Department of Mathematical Science, University of Liverpool, Liverpool L69 3BX, United Kingdom

³School of Business Administration/School of Marxism, China University of Petroleum, Beijing, Karamay 834000, China

⁴Department of Statistics, London School of Economics and Political Science, London WC2A 2AE, United Kingdom

^†

These authors contributed equally.

^*Corresponding author. Email: t.xie10@lse.ac.uk

Corresponding Author

Tianning Xie

Available Online 15 December 2021.

DOI: 10.2991/assehr.k.211209.192 How to use a DOI?
Keywords: Fama-French five-factor model; Finance-related industry; COVID-19; U.S. stock market
Abstract: COVID-19 has had a tremendous influence on economic activity throughout the world. As the largest economy globally, the United States’ finance-related industry changes have an essential impact on the world economy. The purpose of this paper is to evaluate the relative changes of each factor in the Fama-French five-factor model in the U.S. finance-related industry before (May 2019 to February 2020) and after (March 2020 to December 2020) the pandemic and test the applicability of this model. The Fama-French five-factor model, developed from the Fama-French three-factor model, considers the effects of systematic risk, book-to-market ratio, market capitalization factor, earnings factor, and investment factor on fund performance. It also provides a more comprehensive assessment of fund performance and a more effective measure of a fund’s ability to achieve excess returns through active investment management. The results indicate that four sectors of Banking, Trading, Insurance, and Real Estate in the finance-related industry are sensitive and volatile to the COVID-19 crisis. Fama-French five factors of these sectors have reacted responsively to the outbreak. Especially for the Insurance and Real Estate, Robust minus Weak (RMW), High minus Low (HML), and Conservative minus Aggressive (CMA) have significant changes. In this paper, the performances of these four industries under the pandemic were discussed, and the reasons for the different reactions were analyzed. It is concluded that the COVID-19 outbreak has a particular impact on all finance-related industries, but the forms and degrees of effects are different in each sector.
Open Access: This is an open access article under the CC BY-NC license.

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Volume Title: Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
Series: Advances in Economics, Business and Management Research
Publication Date: 15 December 2021
ISBN: 978-94-6239-483-4
ISSN: 2352-5428
DOI: 10.2991/assehr.k.211209.192 How to use a DOI?
Open Access: This is an open access article under the CC BY-NC license.

Cite this article

ris enw bib

TY  - CONF
AU  - Yuhan Cai
AU  - Yue Shen
AU  - Ting Wang
AU  - Tianning Xie
PY  - 2021
DA  - 2021/12/15
TI  - Examination of U.S. Finance-Related Industry Under COVID-19 Based on Fama-French model
BT  - Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)
PB  - Atlantis Press
SP  - 1191
EP  - 1198
SN  - 2352-5428
UR  - https://doi.org/10.2991/assehr.k.211209.192
DO  - 10.2991/assehr.k.211209.192
ID  - Cai2021
ER  -

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