The Impact of COVID-19 on Consumer Durable Industry Based on Fama-French Five-Factor Model

Abstract

As COVID-19 has negatively impacted the economy in the U.S., this study applies the Fama-French five-factor model to examine the performance of the consumer durable industry before and during the outbreak of COVID-19 using the dataset from Kenneth R. French Data Library. The dataset has been divided into two time periods before and during the COVID-19 outbreak, from February 01, 2019 to March 01, 2020 and from March 1, 2020, and March 1, 2021. By using multiple linear regression, it is significant that the consumer durable industry is affected to great extent. The result shows that the market factor remained significant during two periods, but the HML and RMW factors become insignificant after the outbreak of COVID-19. The significance of SMB factor suggests that investors preferred companies with small market value. The value of interception represents the items that these variables can’t explain. Before the epidemic, the interception is insignificant. However, the interception became significant after the epidemic, indicating that the calculation of expected excess return is affected by some unexpected factors. Overall, these changes also inform investors' stock decisions on the consumer durables sector during the outbreak of COVID-19.)