Testing the consistency of beta during the COVID 19 pandemic

Stock markets are extremely sensitive to news and unexpected events, which leads stock prices to quickly react to all information concerning future events (Niederhoffer, 1971). According to Merril (1984), the market has some very bad moments immediately following the tragic news because selling drives prices down to a surprising degree. However, when a day passes, the market recovers from its panic and sometimes works upward to a higher level. This research will test the consistency of beta during the COVID 19 pandemic using the CAPM and Fama-French models. We investigate whether or not the beta is consistent during the pandemic of COVID 19. We find the CAPM model poorly explains the excess returns whereas the Fama-French three factor model is better at explaining excess returns thanks to the size and the value factors. As a possible explanation, we suspect the possibility of the KOPSI200 being a misleading index during critical periods such as the COVID 19 pandemic. We discover results proving otherwise.