When Do and Which Fama–French Factors Explain Industry Returns?

The author examines the statistical significance of the five Fama–French factors and several macroeconomic variables by decade (since the 1960s) and industry. The main findings indicate that not all factors were significant in each decade and for each industry. Also, when the Fama–French factors were present in the regressions, the macroeconomic variables often lost their significance for these industries in each decade. Finally, when constructing factors out of the macro variables, it was found that they were significant for many industries, mainly from the 1970s through the 1990s and part of the 2010s. These findings have implications for portfolio managers when selecting industries based on factor models.