Table 5 Fama-French asset pricing model...

Table 5

Fama-French asset pricing model and EPU

Economic policy uncertainty index 1: January 1994–December 2023
	$J_{T_{1}}$	$J_{T_{2}}$	$J_{T_{3}}$	$J_{T_{4}}$	$J_{T_{5}}$	$J_{T_{6}}$	$J_{T_{7}}$	$J_{T_{8}}$	$J_{T_{9}}$	$J_{T_{10}}$
	4.32	3.10	4.36	2.10	1.67	3.01	3.70	4.92	4.27	5.31
	(0.37)	(0.54)	(0.36)	(0.72)	(0.80)	(0.56)	(0.45)	(0.30)	(0.37)	(0.26)
	α₁	α₂	α₃	α₄	α₅	α₆	α₇	α₈	α₉	α₁₀
	0.158	−0.346	0.216	0.399	−0.698	−0.138	−0.216	0.234	−0.217	−0.363
	(0.62)	(1.55)	(0.84)	(1.16)	(2.92)	(0.58)	(0.63)	(0.96)	(0.81)	(1.31)
	β_k,1	β_k,2	β_k,3	β_k,4	β_k,5	β_k,6	β_k,7	β_k,8	β_k,9	β_k,10
MKT	0.846	1.019	0.828	0.939	1.317	1.067	1.403	0.789	1.198	1.245
MKT	(8.22)	(10.75)	(11.71)	(3.35)	(11.05)	(7.83)	(7.53)	(7.66)	(8.80)	(8.25)
SMB	0.261	0.381	0.084	0.021	0.394	0.244	0.424	0.228	0.272	0.228
SMB	(4.62)	(4.94)	(0.76)	(0.17)	(6.00)	(3.90)	(3.49)	(3.96)	(2.82)	(2.41)
HML	0.685	0.904	0.547	0.312	1.041	0.739	1.034	0.628	0.821	0.856
HML	(6.04)	(6.58)	(2.92)	(1.21)	(9.81)	(6.38)	(4.12)	(5.47)	(4.48)	(5.06)
EPU1	0.054	0.040	0.106	0.046	−0.019	0.049	0.048	0.053	0.059	0.067
EPU1	(2.38)	(1.72)	(3.33)	(1.85)	(0.51)	(2.10)	(1.66)	(2.36)	(2.32)	(2.43)

Economic policy uncertainty index 1: January 1994–December 2023
	$J_{T_{1}}$	$J_{T_{2}}$	$J_{T_{3}}$	$J_{T_{4}}$	$J_{T_{5}}$	$J_{T_{6}}$	$J_{T_{7}}$	$J_{T_{8}}$	$J_{T_{9}}$	$J_{T_{10}}$
	4.32	3.10	4.36	2.10	1.67	3.01	3.70	4.92	4.27	5.31
	(0.37)	(0.54)	(0.36)	(0.72)	(0.80)	(0.56)	(0.45)	(0.30)	(0.37)	(0.26)
	α₁	α₂	α₃	α₄	α₅	α₆	α₇	α₈	α₉	α₁₀
	0.158	−0.346	0.216	0.399	−0.698	−0.138	−0.216	0.234	−0.217	−0.363
	(0.62)	(1.55)	(0.84)	(1.16)	(2.92)	(0.58)	(0.63)	(0.96)	(0.81)	(1.31)
	β_k,1	β_k,2	β_k,3	β_k,4	β_k,5	β_k,6	β_k,7	β_k,8	β_k,9	β_k,10
MKT	0.846	1.019	0.828	0.939	1.317	1.067	1.403	0.789	1.198	1.245
MKT	(8.22)	(10.75)	(11.71)	(3.35)	(11.05)	(7.83)	(7.53)	(7.66)	(8.80)	(8.25)
SMB	0.261	0.381	0.084	0.021	0.394	0.244	0.424	0.228	0.272	0.228
SMB	(4.62)	(4.94)	(0.76)	(0.17)	(6.00)	(3.90)	(3.49)	(3.96)	(2.82)	(2.41)
HML	0.685	0.904	0.547	0.312	1.041	0.739	1.034	0.628	0.821	0.856
HML	(6.04)	(6.58)	(2.92)	(1.21)	(9.81)	(6.38)	(4.12)	(5.47)	(4.48)	(5.06)
EPU1	0.054	0.040	0.106	0.046	−0.019	0.049	0.048	0.053	0.059	0.067
EPU1	(2.38)	(1.72)	(3.33)	(1.85)	(0.51)	(2.10)	(1.66)	(2.36)	(2.32)	(2.43)

Economic Policy Uncertainty Index 2: January 1994 to December 2023
	$J_{T_{1}}$	$J_{T_{2}}$	$J_{T_{3}}$	$J_{T_{4}}$	$J_{T_{5}}$	$J_{T_{6}}$	$J_{T_{7}}$	$J_{T_{8}}$	$J_{T_{9}}$	$J_{T_{10}}$
	4.02	2.80	4.10	1.42	1.50	2.67	3.49	4.57	3.86	4.81
	(0.41)	(0.59)	(0.40)	(0.84)	(0.83)	(0.61)	(0.48)	(0.33)	(0.43)	(0.31)
	α₁	α₂	α₃	α₄	α₅	α₆	α₇	α₈	α₉	α₁₀
	0.151	−0.339	0.213	0.403	−0.702	−0.136	−0.216	0.223	−0.204	−0.334
	(0.59)	(1.52)	(0.83)	(1.18)	(2.94)	(0.57)	(0.63)	(0.91)	(0.75)	(1.20)
	β_k,1	β_k,2	β_k,3	β_k,4	β_k,5	β_k,6	β_k,7	β_k,8	β_k,9	β_k,10
MKT	0.854	1.014	0.836	0.958	1.325	1.058	1.401	0.802	1.192	1.243
MKT	(8.37)	(11.08)	(11.51)	(3.41)	(11.37)	(7.82)	(7.69)	(7.81)	(8.96)	(8.32)
SMB	0.259	0.372	0.100	0.020	0.402	0.233	0.421	0.228	0.268	0.225
SMB	(4.96)	(4.91)	(0.91)	(0.16)	(6.45)	(3.81)	(3.52)	(4.25)	(2.82)	(2.40)
HML	0.683	0.890	0.576	0.306	1.048	0.725	1.027	0.628	0.807	0.839
HML	(6.41)	(6.69)	(3.11)	(1.17)	(10.44)	(6.37)	(4.16)	(5.80)	(4.52)	(5.10)
EPU2	0.038	0.024	0.075	0.032	−0.011	0.026	0.031	0.037	0.042	0.053
EPU2	(2.50)	(1.57)	(3.59)	(1.81)	(0.44)	(1.65)	(1.65)	(2.52)	(2.54)	(2.89)

Economic Policy Uncertainty Index 2: January 1994 to December 2023
	$J_{T_{1}}$	$J_{T_{2}}$	$J_{T_{3}}$	$J_{T_{4}}$	$J_{T_{5}}$	$J_{T_{6}}$	$J_{T_{7}}$	$J_{T_{8}}$	$J_{T_{9}}$	$J_{T_{10}}$
	4.02	2.80	4.10	1.42	1.50	2.67	3.49	4.57	3.86	4.81
	(0.41)	(0.59)	(0.40)	(0.84)	(0.83)	(0.61)	(0.48)	(0.33)	(0.43)	(0.31)
	α₁	α₂	α₃	α₄	α₅	α₆	α₇	α₈	α₉	α₁₀
	0.151	−0.339	0.213	0.403	−0.702	−0.136	−0.216	0.223	−0.204	−0.334
	(0.59)	(1.52)	(0.83)	(1.18)	(2.94)	(0.57)	(0.63)	(0.91)	(0.75)	(1.20)
	β_k,1	β_k,2	β_k,3	β_k,4	β_k,5	β_k,6	β_k,7	β_k,8	β_k,9	β_k,10
MKT	0.854	1.014	0.836	0.958	1.325	1.058	1.401	0.802	1.192	1.243
MKT	(8.37)	(11.08)	(11.51)	(3.41)	(11.37)	(7.82)	(7.69)	(7.81)	(8.96)	(8.32)
SMB	0.259	0.372	0.100	0.020	0.402	0.233	0.421	0.228	0.268	0.225
SMB	(4.96)	(4.91)	(0.91)	(0.16)	(6.45)	(3.81)	(3.52)	(4.25)	(2.82)	(2.40)
HML	0.683	0.890	0.576	0.306	1.048	0.725	1.027	0.628	0.807	0.839
HML	(6.41)	(6.69)	(3.11)	(1.17)	(10.44)	(6.37)	(4.16)	(5.80)	(4.52)	(5.10)
EPU2	0.038	0.024	0.075	0.032	−0.011	0.026	0.031	0.037	0.042	0.053
EPU2	(2.50)	(1.57)	(3.59)	(1.81)	(0.44)	(1.65)	(1.65)	(2.52)	(2.54)	(2.89)

Note(s): This table reports the average pricing errors (α_i), coefficients of β_k,i and goodness-of-fit statistics obtained from the GMM estimation of system (1) using monthly data from January 1994 to December 2023. We use the FTSE Nareit U.S. REIT indices for 10 real estate sectors. p1: Apartment; p2: Diversified; p3: Healthcare; p4: Industrial; p5: Lodging Resorts; p6: Office; p7: Regional Malls; p8: Residential; p9: Retail; p10: Shopping Centers. J_T is Hansen’s statistic (to test the model’s over-identifying restrictions) and p-values are provided in parentheses

The model is the four-factor APM. The factors are the market excess return (MKT), SMB and HML the Fama and French size (small minus big) and book-to-market (high minus low) factors, and the U.S. Economic Policy Uncertainty indices (EPU1 and EPU2), introduced by Baker et al. (2016). EPU1 is the “Three Components Index”. EPU2 is the “News Based Policy Uncertainty Index”. For the estimates (α and β) the t-stats are provided in parentheses. The table reports the results of the augmented Fama and French asset pricing models, adding the EPU1 and EPU2 indices. N.B. critical values for t-stats are 1.645 (at 10%), 1.960 (at 5%), 2.576 (at 1%)

Source(s): Table created by authors

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