Table 5 PC1 effect controlling for...

Table 5

PC1 effect controlling for factor loading

Panel A: Excess return, CAPM-Alpha and FF3-Alpha
	Ranking on PC1
Controlling for $P r e β_{T M B O}$	1 (Low)	2	3	4	5 (High)	High-Low
Excess return	0.99**	0.71	0.87*	0.46	−0.19	−1.17***
Excess return	(2.20)	(1.38)	(1.67)	(0.80)	(−0.30)	(−2.64)
CAPM-alpha	0.47**	0.08	0.16	−0.33	−0.92**	−1.39***
CAPM-alpha	(2.44)	(0.44)	(1.01)	(−1.12)	(−2.39)	(−3.18)
FF3-alpha	0.19	−0.16	0.02	−0.52	−1.29***	−1.48***
FF3-alpha	(1.31)	(−1.06)	(0.17)	(−1.39)	(−2.71)	(−3.10)

Panel A: Excess return, CAPM-Alpha and FF3-Alpha
	Ranking on PC1
Controlling for $P r e β_{T M B O}$	1 (Low)	2	3	4	5 (High)	High-Low
Excess return	0.99**	0.71	0.87*	0.46	−0.19	−1.17***
Excess return	(2.20)	(1.38)	(1.67)	(0.80)	(−0.30)	(−2.64)
CAPM-alpha	0.47**	0.08	0.16	−0.33	−0.92**	−1.39***
CAPM-alpha	(2.44)	(0.44)	(1.01)	(−1.12)	(−2.39)	(−3.18)
FF3-alpha	0.19	−0.16	0.02	−0.52	−1.29***	−1.48***
FF3-alpha	(1.31)	(−1.06)	(0.17)	(−1.39)	(−2.71)	(−3.10)

Note(s): This table presents the value-weighted average excess returns, CAPM alpha and FF3 alpha of PC1-sorted portfolios, controlling for loading to the left-tail risk factor. We initially sorted the stocks based on their $β_{T M B O}$ values and subsequently sorted them based on PC1. We then calculated the average across the $β_{T M B O}$ dimension to effectively control for risk

Source(s): Created by authors

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