Table 8 Limits to arbitrage and ST ST...

Table 8

Limits to arbitrage and ST

	ST quintile
	1	2	3	4	5	Diff	FF3	FF4
Panel A. Size
Small	2.23	2.09	2.36	2.20	1.43	−0.80	−0.86	−0.97
Small	(4.28)	(4.14)	(4.25)	(3.88)	(2.16)	(−3.17)	(−3.62)	(−4.32)
Big	0.12	0.35	0.22	0.46	−0.29	−0.41	−0.32	−0.47
Big	(0.37)	(1.00)	(0.58)	(1.14)	(−0.66)	(−2.03)	(−1.60)	(−2.56)
Panel B. Price
Low	1.82	1.64	1.78	1.46	0.43	−1.39	−1.48	−1.59
Low	(3.77)	(3.29)	(3.30)	(2.72)	(0.67)	(−5.17)	(−5.84)	(−6.66)
High	0.43	0.72	0.51	0.57	0.24	−0.19	−0.09	−0.21
High	(1.16)	(2.03)	(1.39)	(1.35)	(0.53)	(−1.08)	(−0.51)	(−1.22)
Panel C. Idiosyncratic volatility
Low	1.10	0.85	1.04	1.14	1.27	0.17	0.16	0.10
Low	(2.90)	(2.26)	(2.65)	(3.00)	(3.17)	(1.31)	(1.11)	(0.70)
High	0.45	0.62	0.75	0.29	−0.69	−1.14	−1.32	−1.41
High	(0.91)	(1.22)	(1.54)	(0.57)	(−1.12)	(−3.20)	(−3.87)	(−4.19)

	ST quintile
	1	2	3	4	5	Diff	FF3	FF4
Panel A. Size
Small	2.23	2.09	2.36	2.20	1.43	−0.80	−0.86	−0.97
Small	(4.28)	(4.14)	(4.25)	(3.88)	(2.16)	(−3.17)	(−3.62)	(−4.32)
Big	0.12	0.35	0.22	0.46	−0.29	−0.41	−0.32	−0.47
Big	(0.37)	(1.00)	(0.58)	(1.14)	(−0.66)	(−2.03)	(−1.60)	(−2.56)
Panel B. Price
Low	1.82	1.64	1.78	1.46	0.43	−1.39	−1.48	−1.59
Low	(3.77)	(3.29)	(3.30)	(2.72)	(0.67)	(−5.17)	(−5.84)	(−6.66)
High	0.43	0.72	0.51	0.57	0.24	−0.19	−0.09	−0.21
High	(1.16)	(2.03)	(1.39)	(1.35)	(0.53)	(−1.08)	(−0.51)	(−1.22)
Panel C. Idiosyncratic volatility
Low	1.10	0.85	1.04	1.14	1.27	0.17	0.16	0.10
Low	(2.90)	(2.26)	(2.65)	(3.00)	(3.17)	(1.31)	(1.11)	(0.70)
High	0.45	0.62	0.75	0.29	−0.69	−1.14	−1.32	−1.41
High	(0.91)	(1.22)	(1.54)	(0.57)	(−1.12)	(−3.20)	(−3.87)	(−4.19)

Note(s): This table reports subsample results based on firm size, price, and idiosyncratic volatility. At the end of each month, stocks are first sorted into terciles based on one of these characteristics. Within each tercile, stocks are further sorted into quintiles according to the salience theory measure (ST). Portfolios are held for one month. The column labeled “Diff” reports the raw return spread between the highest and lowest quintiles (Q5–Q1). The subsequent columns (FF3 and FF4) report the corresponding alphas from Fama and French (1993) three-factor and Carhart (1997) four-factor models. Newey and West (1987) t-statistics with 12 lags are shown in parentheses. The sample consists of all common stocks listed on KOSPI and KOSDAQ from March 2005 to December 2024

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