Author(s)

Kaiyan Hou

Corresponding Author

Kaiyan Hou

ABSTRACT

COVID-19 has been shocking to the global economy. The majority of industries suffer from heavy loss. During this period, investors, who need to withstand this huge financial risk, desire to seek different capital asset pricing models to estimate the performance of various stock portfolios. To help them achieve this goal, this article adopts the Fama-French five-factor model to analyze the change of performance of the retail industry from September 2019 to August 2020. Through the regression towards selected data, coefficients of five factors can be calculated. The coefficient of total market portfolio return (MKT) is close to 1, which conveys that the performance of retail industry is similar to that of the whole US market. The coefficient of Small Minus Big Size (SMB) changes a little and is still larger than 0. Most small-size companies perform better than big-size ones. After the epidemic, Robust Minus Weak Operating Profitability (RMW) and Conservative Minus Aggressive investment (CMA) become redundant factors. This fact reflects that the profitability of companies and investment style weakly affect the return rate of investing in retail industry. However, High Minus Low B/M (HML) becomes a significant factor, and its coefficient keeps larger than 0. The book-to-market ratio becomes a valuable investment indicator, and investing in companies with high ratios is more profitable. Investors are recommended to invest in some retail companies with small size and high book-to-market ratios. Also, it is of great importance to focus on the retail companies that take active action in adopting advanced technology and joining in e-commerce.

KEYWORDS

COVID-19, Fama-French Five-Factor Model, Retail Industry