Table 12 Descriptive statistics of...

Table 12

Descriptive statistics of portfolios were sorted into idiosyncratic risk measures

	Panel A: 90-day formation period			Panel B: 180-day formation period			Panel C: 365-day formation period
	Mean	IE	Carhart alpha	Mean	IE	Carhart alpha	Mean	IE	Carhart alpha
1 (Low)	1.06	0.05	1.10 (3.53)^*	1.00	0.06	1.04 (3.34)^*	0.89	0.08	0.93 (3.00)^*
2	0.86	0.15	0.91 (2.17)^**	0.92	0.16	0.81 (2.01)^**	0.77	0.18	0.79 (1.92)^***
3	0.60	0.18	0.68 (1.77)^***	0.53	0.22	0.60 (1.68)^***	0.43	0.26	0.49 (1.38)
4	−1.12	0.19	−1.19 (−3.31)^*	−1.02	0.24	−1.10 (−3.20)^*	−1.00	0.23	−1.03 (−3.07)^*
5 (High)	−1.24	0.33	−1.26 (−3.57)^*	−1.12	0.30	−1.15 (−3.66)^*	−1.10	0.34	−1.12 (−3.71)^*
5–1	−2.20 (−4.02)^*		−2.36 (−4.30)^*	−2.12 (−3.55)^*		−2.19 (−3.68)^*	−1.99 (−2.22)^**		−2.05 (−2.29)^*

	Panel A: 90-day formation period			Panel B: 180-day formation period			Panel C: 365-day formation period
	Mean	IE	Carhart alpha	Mean	IE	Carhart alpha	Mean	IE	Carhart alpha
1 (Low)	1.06	0.05	1.10 (3.53)^*	1.00	0.06	1.04 (3.34)^*	0.89	0.08	0.93 (3.00)^*
2	0.86	0.15	0.91 (2.17)^**	0.92	0.16	0.81 (2.01)^**	0.77	0.18	0.79 (1.92)^***
3	0.60	0.18	0.68 (1.77)^***	0.53	0.22	0.60 (1.68)^***	0.43	0.26	0.49 (1.38)
4	−1.12	0.19	−1.19 (−3.31)^*	−1.02	0.24	−1.10 (−3.20)^*	−1.00	0.23	−1.03 (−3.07)^*
5 (High)	−1.24	0.33	−1.26 (−3.57)^*	−1.12	0.30	−1.15 (−3.66)^*	−1.10	0.34	−1.12 (−3.71)^*
5–1	−2.20 (−4.02)^*		−2.36 (−4.30)^*	−2.12 (−3.55)^*		−2.19 (−3.68)^*	−1.99 (−2.22)^**		−2.05 (−2.29)^*

Note(s): We construct the estimates ${I E}_{i, t + T}$ at the end of each month from January 1988 through June 2019, as outlined in (11) and (12), using a 90-, 180, and 365-day formation period. The risk factors used in the cross-sectional regressions are those used in model 6 of Table 2. Next, we sort stocks into portfolios at the end of each month based on $E_{t} [{I E}_{i, t + T}]$ and calculate the value-weighted returns of each portfolio in month $t + 1$ ⁠. Panels A, B, and C of this table report summary statistics for the five portfolios sorted into IE, where portfolio 1 represents stocks with the lowest predicted IE and portfolio 5 represents stocks with the highest predicted IE. Column 1 of each panel reports the time-series average of the value-weighted portfolio returns, and column 2 presents their corresponding idiosyncratic IE. Column 3 of each panel reports estimated alphas for the Carhart (1997) four-factor model. ^*,^**, and ^*** denote the significance of t-statistics (in parentheses) at the 1%, 5%, and 10% levels

Source(s): Created by the author

[ViewLarge]

Sharing Unavailable