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

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  • Niall O’Donnell

    (Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland)

  • Darren Shannon

    (Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland)

  • Barry Sheehan

    (Kemmy Business School, University of Limerick, V94 PH93 Limerick, Ireland)

  • Badar Nadeem Ashraf

    (LSBU Business School, London South Bank University, London SE1 0AN, UK)

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.

Suggested Citation

  • Niall O’Donnell & Darren Shannon & Barry Sheehan & Badar Nadeem Ashraf, 2024. "The Impact of COVID-19 on the Fama-French Five-Factor Model: Unmasking Industry Dynamics," IJFS, MDPI, vol. 12(4), pages 1-31, October.
    • Handle: RePEc:gam:jijfss:v:12:y:2024:i:4:p:98-:d:1491907
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