Equity Styles and the Spanish Flu

Abstract

In this brief note we evaluate equity styles during the COVID-19 period, the Spanish Flu pandemic of 1918-1919 and other deep historical market corrections to gain a deeper understanding on the
performance of different groups of stocks during pandemics and crises. To this end we extend the
widely used CRSP database with hand-collected data on U.S stocks pre-1926 and examine and the major market corrections. We find that low-volatility and momentum tend to reduce losses during sharp market selloffs. By contrast, smaller stocks with high yields (value) offer less protection, but perform well during the recovery phase. Over major market selloffs and subsequent recoveries combined equity styles added value.

Keywords: equity styles, equity factors, low volatility, value, size, momentum, crises, pandemics