Research on the Chemical Industry during COVID-19 Based on Fama-French Five Factors Model
DOI:
https://doi.org/10.54691/bcpbm.v20i.1086Keywords:
COVID-19; Fama-French Model; Chemical IndustryAbstract
The COVID-19 outbreak in 2020 has had a significant impact on many industries around the world. Regarding the impact of the epidemic, reasonable pricing of capital assets has an important reference value for investors' investment planning. This study helps investors make more reasonable investment plans by analyzing the changes in the Chemical industry's key factors in the US stock market during the period before and after the epidemic. Fama-French five factors model was adopted, which is effective in asset pricing. The target industry introduced in this research is a chemical that has been developed for decades but also has some new opportunities at the same time. Additionally, multiple linear regression is also performed in the analysis process to obtain the coefficients of five factors in the model. The results suggest that the beta of rm-rf factor changed from 1.065 to 0.909, which means the chemical industry tends to less sensitive to the market. The SMB and CMA factors are basically unchanged, with the HML factor changing from insignificant to significant due to the market's downward trend, while RMW performed in the opposite direction. Therefore, it concludes that investors should prefer to invest in the chemical industry with a smaller market scale and higher price-to-book ratio during COVID-19.
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