Research Article
Empirical Research on Pharmaceutical Industry Returns Based on Fama-French Three-Factor Model
@INPROCEEDINGS{10.4108/eai.28-10-2022.2328423, author={Huijuan Chen and Xinyi Mi and Yingwei Xu}, title={Empirical Research on Pharmaceutical Industry Returns Based on Fama-French Three-Factor Model}, proceedings={Proceedings of the International Conference on Financial Innovation, FinTech and Information Technology, FFIT 2022, October 28-30, 2022, Shenzhen, China}, publisher={EAI}, proceedings_a={FFIT}, year={2023}, month={4}, keywords={pharmaceutical industry; stock returns; fama-french three-factor}, doi={10.4108/eai.28-10-2022.2328423} }- Huijuan Chen
Xinyi Mi
Yingwei Xu
Year: 2023
Empirical Research on Pharmaceutical Industry Returns Based on Fama-French Three-Factor Model
FFIT
EAI
DOI: 10.4108/eai.28-10-2022.2328423
Abstract
The Covid-19 pandemic swept the world in early 2020, which not only aroused widespread social concern but also made the financial market shocked and made investors panic, while the pharmaceutical industry received high attention. In this paper, nearly 300 companies in China’s pharmaceutical industry are studied and divided into six portfolios based on market capitalization size and book-to-market ratio, and the Fame-French three-factor model is applied to regression analysis of the full sample, before, and after the outbreak of Covid-19 pandemic return segments. The results show that the three-factor model has good explanatory power on stock returns in the Chinese pharmaceutical industry, and the market factor, size factor, and book-to-market ratio factor all have an impact on stock returns in the pharmaceutical industry. Among them, the market factor has the most significant impact. However, the explanatory power after the Covid-19 pandemic is not as strong as before the Covid-19 pandemic, which may be due to various reasons such as the instability of investor sentiment and the intricacies of the market environment, which increase the uncertainty of healthcare stock returns after the Covid-19 pandemic. Fewer studies have analyzed and studied the impact of stock returns in the pharmaceutical industry using multiple perspectives, and this paper helps investors establish a clear investment logic to decide their commitment to the pharmaceutical industry.