Analysis of the COVID-19 Pandemic on FAAMG Companies’ Performances Under the Fama-French Five-Factor Model

Research Article
Open access

Analysis of the COVID-19 Pandemic on FAAMG Companies’ Performances Under the Fama-French Five-Factor Model

Boyu Yang 1*
  • 1 Kelley School of Business, Indiana University Bloomington, IN 47405, USA    
  • *corresponding author yangboyu@iu.edu
Published on 21 March 2023 | https://doi.org/10.54254/2754-1169/3/2022858
AEMPS Vol.3
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-15-7
ISBN (Online): 978-1-915371-16-4

Abstract

The COVID-19 pandemic has led the U.S. stock market to tumble during the last two years. To further discover the effect of the pandemic on specific companies, this paper utilizes the Fama-French five-factor model to analyze the performance changes for FAMMG companies before and after the COVID-19 outbreak. OLS method is applied to the FAAMG companies’ stock returns to examine the fitness of the model, and the fitness is strengthened after the outbreak. The pandemic causes significant changes in betas of the Fama-French five-factor model, specifically Robust minus Week (RMW) and Conservative minus Aggressive (CMA).

Keywords:

Industrial Analysis, Fama-French, Asset Pricing, Technology Industry, COVID-19

Yang,B. (2023). Analysis of the COVID-19 Pandemic on FAAMG Companies’ Performances Under the Fama-French Five-Factor Model. Advances in Economics, Management and Political Sciences,3,689-694.
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References

[1]. Durbin, J., & Watson, G. S. (1950). Testing for serial correlation in least squares regression. Biometrika, 37(3/4), 409-428. doi: 10.2307/2332391

[2]. Omer SB, Malani P, del Rio C. (2020). The COVID-19 Pandemic in the US: A Clinical Update. JAMA. 2020;323(18):1767–1768. doi: 10.1001/jama.2020.5788

[3]. Y. Blagodarnyy and K. Stepanov, "The Express Valuation Model: Case of FAAMG Companies," 2021 14th International Conference Management of large-scale system development (MLSD), 2021, pp. 1-5, doi: 10.1109/MLSD52249.2021.9600116.

[4]. Fama, E. F., & French, K. R. (2017). International tests of a five-factor asset pricing model. Journal of financial Economics, 123(3), 441-463. doi: 10.1016/j.jfineco.2016.11.004

[5]. Fama, E.F. and French, K.R. (2014), A Five-Factor Asset Pricing Model. Fama-Miller Working Paper, doi: 10.2139/ssrn.2287202

[6]. Fama, E.F. and French, K.R. (1993), Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33: 3-56. doi: 10.1016/0304-405X(93)90023-5

[7]. Fama, E.F. and French, K.R. (2006), The Value Premium and the CAPM. The Journal of Finance, 61: 2163-2185. doi: 10.1111/j.1540-6261.2006.01054.x

[8]. Womack, Kent L. and Zhang, Ying, Understanding Risk and Return, the CAPM, and the Fama-French Three-Factor Model. https://ssrn.com/abstract=481881

[9]. Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47(1), 13–37. doi: 10.2307/1924119

[10]. Sharpe, W.F. (1964), CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*. The Journal of Finance, 19: 425-442. doi: 10.1111/j.1540-6261.1964.tb02865.x

[11]. Treynor, Jack L. (1962), Jack Treynor's 'Toward a Theory of Market Value of Risky Assets' (Fall 1962). doi: 10.2139/ssrn.628187

Cite this article

Yang,B. (2023). Analysis of the COVID-19 Pandemic on FAAMG Companies’ Performances Under the Fama-French Five-Factor Model. Advances in Economics, Management and Political Sciences,3,689-694.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 6th International Conference on Economic Management and Green Development (ICEMGD 2022), Part Ⅰ

ISBN：978-1-915371-15-7(Print) / 978-1-915371-16-4(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2022
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.3
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Durbin, J., & Watson, G. S. (1950). Testing for serial correlation in least squares regression. Biometrika, 37(3/4), 409-428. doi: 10.2307/2332391

[2]. Omer SB, Malani P, del Rio C. (2020). The COVID-19 Pandemic in the US: A Clinical Update. JAMA. 2020;323(18):1767–1768. doi: 10.1001/jama.2020.5788

[3]. Y. Blagodarnyy and K. Stepanov, "The Express Valuation Model: Case of FAAMG Companies," 2021 14th International Conference Management of large-scale system development (MLSD), 2021, pp. 1-5, doi: 10.1109/MLSD52249.2021.9600116.

[4]. Fama, E. F., & French, K. R. (2017). International tests of a five-factor asset pricing model. Journal of financial Economics, 123(3), 441-463. doi: 10.1016/j.jfineco.2016.11.004

[5]. Fama, E.F. and French, K.R. (2014), A Five-Factor Asset Pricing Model. Fama-Miller Working Paper, doi: 10.2139/ssrn.2287202

[6]. Fama, E.F. and French, K.R. (1993), Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33: 3-56. doi: 10.1016/0304-405X(93)90023-5

[7]. Fama, E.F. and French, K.R. (2006), The Value Premium and the CAPM. The Journal of Finance, 61: 2163-2185. doi: 10.1111/j.1540-6261.2006.01054.x

[8]. Womack, Kent L. and Zhang, Ying, Understanding Risk and Return, the CAPM, and the Fama-French Three-Factor Model. https://ssrn.com/abstract=481881

[9]. Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics, 47(1), 13–37. doi: 10.2307/1924119

[10]. Sharpe, W.F. (1964), CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*. The Journal of Finance, 19: 425-442. doi: 10.1111/j.1540-6261.1964.tb02865.x

[11]. Treynor, Jack L. (1962), Jack Treynor's 'Toward a Theory of Market Value of Risky Assets' (Fall 1962). doi: 10.2139/ssrn.628187

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