Comparison of the performances for CAPM and Fama-French models during COVID-19

Jianing Wei; Nanyi Xiao; Luyue Zhang

doi:10.1117/12.2671514

28 April 2023 Comparison of the performances for CAPM and Fama-French models during COVID-19

Jianing Wei, Nanyi Xiao, Luyue Zhang

Proceedings Volume 12610, Third International Conference on Artificial Intelligence and Computer Engineering (ICAICE 2022); 126104R (2023) https://doi.org/10.1117/12.2671514
Event: Third International Conference on Artificial Intelligence and Computer Engineering (ICAICE 2022), 2022, Wuhan, China

Abstract

Since the outbreak of COVID-19, it has caused a startling stun to both society and economy in numerous nations, where different industries suffered unequally. This paper reviews the various performance of the Capital Asset Pricing Model (CAPM), and the Fama-French three-factor model and the five-factor model in different regions and industries. To metric the performance, various statistics models and scaling are applied including Pearson correlation, linear regression, R² scores, t-test, etc. Specifically, this paper demonstrates the different performances of the CAPM model on the US and Egyptian stock markets, whereas using generalized method of moments in a panel data analysis to evaluate the performance in the U.S. market and the paired sample t-test and Wilcoxon signed-rank to evaluate the performance in the Egyptian market. The Fama-French three-factor model and five-factor model are both based on the U.S. market and analyze the model's performance (measured by significant level) in the U.S. market in general and in individual sectors, respectively. Whereas, in terms of three-factors model, the OLS estimation and relapse expected excess return are used onto the variables and multiple linear regression method was used to study the significance of factors in three sub-industries. Regarding to five-factors model, a multivariate regression with covariates and OLS estimation are the method for evaluation. These results shed light for deeply understanding the model and recognizing the impact on the security market of the COVID-19.

Citation Download Citation

Jianing Wei, Nanyi Xiao, and Luyue Zhang "Comparison of the performances for CAPM and Fama-French models during COVID-19", Proc. SPIE 12610, Third International Conference on Artificial Intelligence and Computer Engineering (ICAICE 2022), 126104R (28 April 2023); https://doi.org/10.1117/12.2671514

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KEYWORDS

COVID 19

Industry

Performance modeling

Data modeling

Linear regression

Mathematical modeling

Statistical modeling

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