Evaluating the Integration of Asymmetric Effects of COVID-19 Outbreak and Firm Resilience into the Fama-French Model
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

Evaluating the Integration of Asymmetric Effects of COVID-19 Outbreak and Firm Resilience into the Fama-French Model

Document Type : Original Article

Authors
1 Ph.D. Student, Department of accountings. Kerman branch, Islamic Azad University ,Kerman, Iran
2 Professor, Department of Accounting, Faculty of Economics and Management, Shahid Bahonar University of Kerman, Kerman, Iran
Abstract
This study examines the Fama and French (1993) three-factor model by incorporating the asymmetric effects of the COVID-19 outbreak and firm-level immunity factors to better explain stock returns. The research utilizes monthly data from 5,256 companies listed on the Tehran Stock Exchange during the years 2020 to 2022. The findings indicate that adding the impact of the COVID-19 outbreak to the Fama-French model significantly enhances its explanatory power regarding expected returns. Specifically, the model shows that an increase in COVID-19 cases leads to a decrease in stock returns, while a decline in cases results in higher stock returns. Furthermore, the inclusion of firm-level immunity factors further strengthens the model's explanatory power. This combined approach, by accounting for industry-specific vulnerabilities and corporate resilience, provides a more accurate understanding of market dynamics during the pandemic. The results highlight the importance of incorporating pandemic-related variables and firm-specific factors into the model to better capture variations in stock returns. The revised model offers a more comprehensive understanding of market behavior during the pandemic and provides valuable insights for investors and analysts navigating the complexities of financial markets during global crises.
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