Note(s): This table displays descriptive statistics for portfolios categorized by IV. We calculate the $IVi,t$ estimates each month from January 1988 to June 2019 following the method in Equation (8). Stocks are then grouped into portfolios at the end of each month based on $IVi,t$⁠, and we calculate the value-weighted returns for each portfolio in the subsequent month (t+1). While all idiosyncratic risk factors are determined using a 60-day formation period, IV is computed over a 30-day period to allow for comparisons with the IV used by Ang et al. (2006, 2009). The portfolios are divided into five groups, with Portfolio 1 containing stocks with the lowest $IVi,t$ levels and Portfolio 5 with the highest. Column 1 shows the average value-weighted returns of these portfolios over time. Columns 2 to 4 detail the time-series standard deviation, skewness, and total entropy of the portfolio returns. Columns 5 to 9 provide the value-weighted cross-sectional averages of $IVi,t$⁠, $IEi,t$⁠, $ISi,t$⁠, $IKi,t$⁠, and $Sizei,t$ within each portfolio. Columns 10 and 11 present the alphas and Newey and West (1987) t-statistics (in parentheses) for the CAPM and Fama-French’s (1993) three-factor models. The symbols * and *** indicate statistical significance at the 1% and 10% levels, respectively

Source(s): Created by the author