Effect of Car Industry in US Stock Market during COVID-19 Based on Fama-French Five-Factor Model

Abstract

The pandemic has created a severe global economic recession and destroyed many industries since it broke out at the beginning of 2020. However, many car enterprises had an outstanding performance last fiscal year. This paper applied Fama-French five-factor model to analyze the effect on the car industry under the pandemic. Based on the daily five-factor data (US car industry stocks) from Kenneth R. French's database, we select the corresponding 20-month data, with the outbreak point of March 1, 2020, as the dividing line. March 1, 2020, to December 31, 2020, is post-epidemic, while May 2019 to February 2020 is pre-epidemic. After regression analysis, it finds that COVID-19 has a dramatic effect on the car industry. With the development of the electric car, investors prefer to invest in emergent electric car companies. On the other hand, the electric car industry still has some urgent technology barriers. Investors should concentrate on the technology development of electric cars instead of blindly following the investment boom.