Where Is the Risk in Risk Factors? Evidence from the Vietnam War to the COVID-19 Pandemic

47 Pages Posted: 8 Jun 2020 Last revised: 13 Apr 2022

See all articles by Paul Geertsema

Paul Geertsema

University of Auckland Business School

Helen Lu

University of Auckland Business School; University of Auckland - Department of Accounting and Finance

Date Written: June 6, 2020

Abstract

During the COVID-19 pandemic all of the Fama and French (2018) factors except momentum lost money. But this is atypical – historically the value, profitability, investment and momentum factors are more profitable in bear markets. Duration explains both their COVID-19 losses and other bear-market profits. Factor profitability in bear markets arises primarily from the short side. Biased expectations corrected around earnings announcement offer only a partial explanation.

Keywords: Risk factors; COVID-19; Bear markets; Cash flow duration; Financial constraints

JEL Classification: G12; G14

Suggested Citation

Geertsema, Paul G. and Lu, Helen, Where Is the Risk in Risk Factors? Evidence from the Vietnam War to the COVID-19 Pandemic (June 6, 2020). Available at SSRN: https://ssrn.com/abstract=3620691 or http://dx.doi.org/10.2139/ssrn.3620691

Paul G. Geertsema

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Helen Lu (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

HOME PAGE: http://www.business.auckland.ac.nz/people/hlu079

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand

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