Table 3 Raw return vs the continuously...

Table 3

Raw return vs the continuously compounded return

Variable	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$
IVOL (λ₁)	1.2142 (1.39)	−4.4337** (−4.17)	4.3283** (3.47)	−1.1580 (−0.93)	−2.6969** (−3.95)	−7.1910** (−6.55)
IVOL * LnP/V(t):Q2 (λ₂)			−3.8638** (−4.56)	−2.8613** (−4.28)
IVOL * LnP/V(t):Q3 (λ₃)			−4.3886** (−5.22)	−4.1540** (−4.82)
IVOL * LnP/V(t):Q4 (λ₄)			−5.7958** (−7.66)	−6.3433** (−8.06)
IVOL * LnP/V(t):Q5 (λ₅)			−7.2149** (−7.65)	−8.4960** (−7.88)
IVOL * LnP/V(t + 1):Q2 (λ₂)					2.1056** (3.56)	2.7174** (3.91)
IVOL * LnP/V(t + 1):Q3 (λ₃)					2.4558** (3.64)	3.0296** (3.85)
IVOL * LnP/V(t + 1):Q4 (λ₄)					5.1569** (6.66)	4.9885** (5.64)
IVOL * LnP/V(t + 1):Q5 (λ₅)					16.2895** (7.70)	11.7653** (5.84)
N	180,717	180,717	180,717	180,717	180,717	180,717
R²	0.1267	0.1614	0.1306	0.1657	0.3032	0.3670
LnP/V(t):Qi/LnP/V(t + 1):Qi	No	No	Yes	Yes	Yes	Yes
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes
λ₁ + λ₂			0.4644 (0.31)	−4.0193** (−2.83)	−0.5912 (−0.65)	−4.4736** (−3.44)
λ₁ + λ₃			−0.0603 (−0.04)	−5.3121** (−3.50)	−0.2410 (−0.25)	−4.1614** (−3.08)
λ₁ + λ₄			−1.4676 (−1.01)	−7.5013** (−5.08)	2.4601* (2.38)	−2.2025 (−1.56)
λ₁ + λ₅			−2.8867^† (−1.85)	−9.6541** (−5.85)	13.5927** (6.11)	4.5743^† (1.99)

Variable	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$	$S t d R_{t \to t + 1}$	$S t d L n R_{t \to t + 1}$
IVOL (λ₁)	1.2142 (1.39)	−4.4337** (−4.17)	4.3283** (3.47)	−1.1580 (−0.93)	−2.6969** (−3.95)	−7.1910** (−6.55)
IVOL * LnP/V(t):Q2 (λ₂)			−3.8638** (−4.56)	−2.8613** (−4.28)
IVOL * LnP/V(t):Q3 (λ₃)			−4.3886** (−5.22)	−4.1540** (−4.82)
IVOL * LnP/V(t):Q4 (λ₄)			−5.7958** (−7.66)	−6.3433** (−8.06)
IVOL * LnP/V(t):Q5 (λ₅)			−7.2149** (−7.65)	−8.4960** (−7.88)
IVOL * LnP/V(t + 1):Q2 (λ₂)					2.1056** (3.56)	2.7174** (3.91)
IVOL * LnP/V(t + 1):Q3 (λ₃)					2.4558** (3.64)	3.0296** (3.85)
IVOL * LnP/V(t + 1):Q4 (λ₄)					5.1569** (6.66)	4.9885** (5.64)
IVOL * LnP/V(t + 1):Q5 (λ₅)					16.2895** (7.70)	11.7653** (5.84)
N	180,717	180,717	180,717	180,717	180,717	180,717
R²	0.1267	0.1614	0.1306	0.1657	0.3032	0.3670
LnP/V(t):Qi/LnP/V(t + 1):Qi	No	No	Yes	Yes	Yes	Yes
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Industry FE	Yes	Yes	Yes	Yes	Yes	Yes
λ₁ + λ₂			0.4644 (0.31)	−4.0193** (−2.83)	−0.5912 (−0.65)	−4.4736** (−3.44)
λ₁ + λ₃			−0.0603 (−0.04)	−5.3121** (−3.50)	−0.2410 (−0.25)	−4.1614** (−3.08)
λ₁ + λ₄			−1.4676 (−1.01)	−7.5013** (−5.08)	2.4601* (2.38)	−2.2025 (−1.56)
λ₁ + λ₅			−2.8867^† (−1.85)	−9.6541** (−5.85)	13.5927** (6.11)	4.5743^† (1.99)

Note(s): This table presents results of the analysis that uses the continuously compounded return as the dependent variable. $R_{t \to t + 1}$ is stock return over 07/01 of t to 06/30 of t + 1, t = 1966 to 2015. $L n R_{t \to t + 1}$ ⁠, the continuously compounded return, is the natural logarithm of 1 plus $R_{t \to t + 1}$ ⁠. $S t d R_{t \to t + 1}$ (⁠ $S t d L n R_{t \to t + 1}$ ⁠) is standardized $R_{t \to t + 1}$ (⁠ $L n R_{t \to t + 1}$ ⁠) with a mean of 0 and a standard deviation of 1. $I V O L$ is the idiosyncratic volatility measure, defined in Appendix 2. $L n P / V (t)$ is the difference between the natural logarithm of the market value of equity on 06/30 of t and the natural logarithm of the estimated intrinsic value of equity obtained using the latest accounting information available by 06/30 of t (see Appendix 1). $L n P / V (t) : Q i$ is an indicator variable that equals 1 if $L n P / V (t)$ is in the i-th quintile (0 otherwise), i = 1 to 5. Industry FE stands for industry fixed effects. Controls stands for control variables and are defined in Appendix 2. T-statistics in parentheses are adjusted for Newey-West autocorrelations of three lags. **, *, and † denote statistical significance at the 1, 5, and 10% levels, respectively, using a 2-tailed test

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