The Effectiveness of Fama-French 5 Factor Models Under COVID-19 Condition in the Gaming Industry

Chenchen He, Yixuan Guo

2024

Abstract

Contemporarily, it is crucial to investigate the effectiveness of assets valuation approaches in some special conditions. This article is aimed at assessing the effectiveness of the Fama and French 5 factor model under COVID-19 pandemic using data from the gaming industry. The empirical evidence has been presented in stable stock markets; its manifestations during the periods of increased volatility and instability of the markets remain poorly explored. This research intends to discover how Five-Factor model reacted to the impact from the pandemic in such a way that the market abnormalities can be analysed via data from the years 2019 and 2020. The R² value in five-factor model has shown more capability in explaining the excess returns during the pandemic with 0.8482+, compared to 0.6245, which was indicated before. In addition, all five predictors, which included factors related to profitability and investment strategy, proved to be significant in the pandemic period, as opposed to only three predictors in the period before the pandemic. Nevertheless, the predictive power of the model tends to deteriorate, which can be verified by the increase of RMSE. While this work establishes the strength of the model in a volatile environment, it should also be noted that forecasting inaccuracies are uncovered. These experiences, therefore, bring copious lessons for the investors and financial analysts as they analyse portfolios in such crisis scenarios as the one during the COVID-19.

Paper Citation

in Harvard Style

He C. and Guo Y. (2024). The Effectiveness of Fama-French 5 Factor Models Under COVID-19 Condition in the Gaming Industry. In Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI; ISBN 978-989-758-726-9, SciTePress, pages 170-174. DOI: 10.5220/0013208600004568

in Bibtex Style

@conference{ecai24,
author={Chenchen He and Yixuan Guo},
title={The Effectiveness of Fama-French 5 Factor Models Under COVID-19 Condition in the Gaming Industry},
booktitle={Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI},
year={2024},
pages={170-174},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0013208600004568},
isbn={978-989-758-726-9},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on E-commerce and Artificial Intelligence - Volume 1: ECAI
TI - The Effectiveness of Fama-French 5 Factor Models Under COVID-19 Condition in the Gaming Industry
SN - 978-989-758-726-9
AU - He C.
AU - Guo Y.
PY - 2024
SP - 170
EP - 174
DO - 10.5220/0013208600004568
PB - SciTePress