Table 8 FM regressions on IS - and IV...

Table 8

FM regressions on IS- and IV-sorted portfolios

Regressors	Panel A: IV							Panel B: IS
Regressors	1	2	3	4	5	6	7	1	2	3	4	5	6	7
Constant	0.12 (0.98)	0.10 (2.50)^*	0.11 (1.02)	0.11 (1.15)	0.13 (1.07)	0.21 (0.84)	0.22 (0.80)	0.11 (1.22)	0.09 (1.72)	0.09 (1.35)	0.11 (1.95)^***	0.12 (0.48)	0.20 (0.72)	0.20 (0.63)
$E_{t} [{I E}_{p, t + T}]$	−0.68 (−5.33)^*				−0.89 (−5.52)^*	−0.66 (−5.36)^*	−0.68 (−5.52)^*	−0.62 (−4.66)^*				−0.68 (−5.35)^*	−0.60 (−5.67)^*	−0.45 (−4.83)^*
${I S}_{p, t}$		−0.42 (−3.12)^*			−0.13 (−1.32)		−0.40 (−3.72)^*		−0.92 (−6.12)^*			−0.48 (−3.3)^*		−0.45 (−3.66)^*
${I V}_{p, t}$			−0.38 (−2.9)^*		−0.32 (−3.77)^*		−0.13 (−3.74)^*			−0.32 (−3.40)^*		−0.11 (−2.52)^*		−0.095 (−1.98)^**
${I K}_{p, t}$				6.35 (6.34)^*	5.14 (5.33)^*		4.01 (4.33)^*				5.99 (5.55)^*	5.01 (3.89)^*		4.73 (3.26)^*
${M K T}_{p, t}$						−0.13 (−2.41)^*	−0.13 (−2.61)^*						−0.13 (−3.06)^*	−0.12 (−2.2)^**
${S M B}_{p, t}$						0.048 (2.62)^*	0.039 (2.12)^**						0.049 (2.55)^*	0.04 (1.65)
${H M L}_{p, t}$						−0.18 (−4.94)^*	−0.24 (−6.88)^*						−0.25 (−3.32)^*	−0.20 (−3.24)^*
${M O M}_{p, t}$						−0.005 (−1.99)^**	−0.003 (−1.26)						−0.003 (−1.22)	−0.006 (−2.53)^*
${L E V}_{p, t}$						−0.11 (−3.14)^*	−0.11 (−3.14)^*						−0.13 (−3.15)^*	−0.11 (−3.21)^*
${L I Q}_{p, t}$						−1.05 (−5.68)^*	−0.97 (−5.06)^*						−0.98 (−5.92)^*	−0.99 (−5.99)^*
${MAX}_{p, t}$						−0.064 (−3.12)^*	−0.06 (−3.01)^*						−0.06 (−3.21)^*	−0.05 (−3.01)^*
${MIN}_{p, t}$						−0.008 (−1.05)	−0.007 (−0.95)						−0.007 (−0.98)	−0.006 (−0.89)
$χ^{2}$	555.10 [0.00]	31.25 [0.04]	14018 [0.00]	510.22 [0.00]	615.30 [0.00]	809.02 [0.00]	921.29 [0.00]	498.44 [0.00]	52.14 [0.03]	86.14 [0.00]	500.29 [0.00]	555.21 [0.00]	762.16 [0.00]	894.15 [0.00]
Pricing error	0.0092	0.078	0.033	0.0088	0.0071	0.005	0.0035	0.0080	0.057	0.044	0.009	0.0086	0.0062	0.0041
Adj $R^{2}$	0.14	0.0028	0.056	0.11	0.21	0.40	0.45	0.11	0.013	0.043	0.10	0.18	0.35	0.43

Regressors	Panel A: IV							Panel B: IS
Regressors	1	2	3	4	5	6	7	1	2	3	4	5	6	7
Constant	0.12 (0.98)	0.10 (2.50)^*	0.11 (1.02)	0.11 (1.15)	0.13 (1.07)	0.21 (0.84)	0.22 (0.80)	0.11 (1.22)	0.09 (1.72)	0.09 (1.35)	0.11 (1.95)^***	0.12 (0.48)	0.20 (0.72)	0.20 (0.63)
$E_{t} [{I E}_{p, t + T}]$	−0.68 (−5.33)^*				−0.89 (−5.52)^*	−0.66 (−5.36)^*	−0.68 (−5.52)^*	−0.62 (−4.66)^*				−0.68 (−5.35)^*	−0.60 (−5.67)^*	−0.45 (−4.83)^*
${I S}_{p, t}$		−0.42 (−3.12)^*			−0.13 (−1.32)		−0.40 (−3.72)^*		−0.92 (−6.12)^*			−0.48 (−3.3)^*		−0.45 (−3.66)^*
${I V}_{p, t}$			−0.38 (−2.9)^*		−0.32 (−3.77)^*		−0.13 (−3.74)^*			−0.32 (−3.40)^*		−0.11 (−2.52)^*		−0.095 (−1.98)^**
${I K}_{p, t}$				6.35 (6.34)^*	5.14 (5.33)^*		4.01 (4.33)^*				5.99 (5.55)^*	5.01 (3.89)^*		4.73 (3.26)^*
${M K T}_{p, t}$						−0.13 (−2.41)^*	−0.13 (−2.61)^*						−0.13 (−3.06)^*	−0.12 (−2.2)^**
${S M B}_{p, t}$						0.048 (2.62)^*	0.039 (2.12)^**						0.049 (2.55)^*	0.04 (1.65)
${H M L}_{p, t}$						−0.18 (−4.94)^*	−0.24 (−6.88)^*						−0.25 (−3.32)^*	−0.20 (−3.24)^*
${M O M}_{p, t}$						−0.005 (−1.99)^**	−0.003 (−1.26)						−0.003 (−1.22)	−0.006 (−2.53)^*
${L E V}_{p, t}$						−0.11 (−3.14)^*	−0.11 (−3.14)^*						−0.13 (−3.15)^*	−0.11 (−3.21)^*
${L I Q}_{p, t}$						−1.05 (−5.68)^*	−0.97 (−5.06)^*						−0.98 (−5.92)^*	−0.99 (−5.99)^*
${MAX}_{p, t}$						−0.064 (−3.12)^*	−0.06 (−3.01)^*						−0.06 (−3.21)^*	−0.05 (−3.01)^*
${MIN}_{p, t}$						−0.008 (−1.05)	−0.007 (−0.95)						−0.007 (−0.98)	−0.006 (−0.89)
$χ^{2}$	555.10 [0.00]	31.25 [0.04]	14018 [0.00]	510.22 [0.00]	615.30 [0.00]	809.02 [0.00]	921.29 [0.00]	498.44 [0.00]	52.14 [0.03]	86.14 [0.00]	500.29 [0.00]	555.21 [0.00]	762.16 [0.00]	894.15 [0.00]
Pricing error	0.0092	0.078	0.033	0.0088	0.0071	0.005	0.0035	0.0080	0.057	0.044	0.009	0.0086	0.0062	0.0041
Adj $R^{2}$	0.14	0.0028	0.056	0.11	0.21	0.40	0.45	0.11	0.013	0.043	0.10	0.18	0.35	0.43

Note(s): This analysis follows the same methodology as in Table 4, with the only difference being that we now organize stocks into 100 portfolios each month based on IV. The outcomes of these IV-based pricing regressions are presented in Panel A. Following this, we apply the same categorization process using IS and display the results of the IS-based pricing regressions in Panel B. The symbols *, **, and *** indicate statistical significance at the 1%, 5%, and 10% levels, respectively. The Fama-MacBeth (FM) t-statistics and the results of the $χ^{2}$ test are provided in parentheses and brackets, respectively

Source(s): Created by the author

[ViewLarge]

Sharing Unavailable