Table 7 The effects of stock market...

Table 7

The effects of stock market liquidity on returns – WLS estimation

Model	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Weighting variable	Lagged return	Lagged return	Lagged return	Lagged return	Unit variance	Unit variance	Unit variance	Unit variance
const	0.068***	0.057***	0.051***	0.054***	0.014***	0.004***	0.016***	0.007***
const	(15.42)	(14.55)	(13.63)	(12.89)	(8.263)	(2.691)	(9.626)	(4.562)
Size	−0.010***	−0.009***	−0.011***	−0.010***	0.0005***	0.0007***	0.0004***	0.0005***
Size	(18.97)	(16.79)	(19.83)	(18.12)	(5.972)	(6.579)	(4.172)	(5.183)
B-MV	0.000	0.000	0.000	0.000	0.00003**	0.00003**	0.00003*	0.00004**
B-MV	(0.242)	(0.261)	(0.186)	(0.194)	(2.001)	(2.079)	(1.706)	(2.279)
Risk	−0.006***	−0.006***	−0.006***	−0.005***	−0.006***	−0.006***	−0.008***	−0.008***
Risk	(3.602)	(3.659)	(3.229)	(2.980)	(10.64)	(10.46)	(13.25)	(13.26)
Momentum	0.010***	0.010***	0.011***	0.011***	0.010***	0.010***	0.010***	0.011***
Momentum	(6.662)	(7.169)	(7.108)	(7.191)	(12.79)	(13.13)	(12.82)	(13.48)
Reversal	−0.012**	−0.010**	−0.012**	−0.012**	0.001	−0.000	−0.001	−0.002
Reversal	(2.393)	(1.995)	(2.374)	(2.214)	(0.385)	(0.137)	(0.192)	(0.722)
log(PQCS)	0.002***		0.002***		0.002***		0.002***
log(PQCS)	(3.599)		(3.098)		(11.63)		(11.21)
log(ILLIQ)		0.002***		0.0015***		0.001***		0.001***
log(ILLIQ)		(5.662)		(4.408)		(10.63)		(10.89)
log(HP)	−0.007***	−0.007***			−0.002***	−0.002***
log(HP)	(19.71)	(19.22)			(27.30)	(27.04)
log(HP ^FF)			−0.007***	−0.007***			−0.003***	−0.004***
log(HP ^FF)			(20.08)	(19.33)			(35.10)	(35.48)
Stock Fixed Effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Time Fixed Effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Number of observations	135,581	135,963	127,896	127,391	137,052	137,379	129,240	128,691
Adj. R-squared	0.082	0.086	0.084	0.085	0.122	0.128	0.126	0.129

Model	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Weighting variable	Lagged return	Lagged return	Lagged return	Lagged return	Unit variance	Unit variance	Unit variance	Unit variance
const	0.068***	0.057***	0.051***	0.054***	0.014***	0.004***	0.016***	0.007***
const	(15.42)	(14.55)	(13.63)	(12.89)	(8.263)	(2.691)	(9.626)	(4.562)
Size	−0.010***	−0.009***	−0.011***	−0.010***	0.0005***	0.0007***	0.0004***	0.0005***
Size	(18.97)	(16.79)	(19.83)	(18.12)	(5.972)	(6.579)	(4.172)	(5.183)
B-MV	0.000	0.000	0.000	0.000	0.00003**	0.00003**	0.00003*	0.00004**
B-MV	(0.242)	(0.261)	(0.186)	(0.194)	(2.001)	(2.079)	(1.706)	(2.279)
Risk	−0.006***	−0.006***	−0.006***	−0.005***	−0.006***	−0.006***	−0.008***	−0.008***
Risk	(3.602)	(3.659)	(3.229)	(2.980)	(10.64)	(10.46)	(13.25)	(13.26)
Momentum	0.010***	0.010***	0.011***	0.011***	0.010***	0.010***	0.010***	0.011***
Momentum	(6.662)	(7.169)	(7.108)	(7.191)	(12.79)	(13.13)	(12.82)	(13.48)
Reversal	−0.012**	−0.010**	−0.012**	−0.012**	0.001	−0.000	−0.001	−0.002
Reversal	(2.393)	(1.995)	(2.374)	(2.214)	(0.385)	(0.137)	(0.192)	(0.722)
log(PQCS)	0.002***		0.002***		0.002***		0.002***
log(PQCS)	(3.599)		(3.098)		(11.63)		(11.21)
log(ILLIQ)		0.002***		0.0015***		0.001***		0.001***
log(ILLIQ)		(5.662)		(4.408)		(10.63)		(10.89)
log(HP)	−0.007***	−0.007***			−0.002***	−0.002***
log(HP)	(19.71)	(19.22)			(27.30)	(27.04)
log(HP ^FF)			−0.007***	−0.007***			−0.003***	−0.004***
log(HP ^FF)			(20.08)	(19.33)			(35.10)	(35.48)
Stock Fixed Effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Time Fixed Effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Number of observations	135,581	135,963	127,896	127,391	137,052	137,379	129,240	128,691
Adj. R-squared	0.082	0.086	0.084	0.085	0.122	0.128	0.126	0.129

Note(s): The table presents the estimated effect of market liquidity and holding period on stock returns using Weighted Least Squares estimation. The dependent variable is the monthly excess (over risk-free return) return on the stock. t-statistics are given in the parentheses and asterisks denote the statistical significance at the 0.1 (*), 0.05 (**) and 0.01 (***) levels

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