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

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.