Table 1.
Descriptive statistics for the Fama-French sector monthly returns (1968/01 to 2016/12).
Table 2.
Conditional Fama-French model risk factors 1968 m01-2016 m12.
Fig 1.
Pástor-Stambaugh liquidity, term spread, and VIX.
Notes: Shaded areas represent US recessions or crises. IML, a portfolio of illiquid minus liquid stocks, is the Pástor-Stambaugh tradable liquidity measure and term spread is the yield spread between 10-year T-bonds and 3-month T-bills.
Table 3.
Parameter estimations for the conditional Fama-French model via OLS by liquidity and beta attributes.
Table 4.
Parameter estimations for the conditional Fama-French model via RIV GMM by liquidity and beta attributes.
Fig 2.
(a) 12-sector average alpha RIV GMM & OLS. (b) 12-sector average beta RIV GMM & OLS. Notes: To capture the business cycle, we use IML as the main driver in the dynamic Eq (9) for our cyclical beta. RIV GMM (GMMd) is our robust instrumental variables approach. Shaded areas represent US recessions or crises. The OLS and GMM series are plotted on the same scale.
Fig 3.
(a) Energy alpha for RIV GMM and OLS. (b) Energy beta for RIV GMM and OLS. Notes: The energy sector has the highest value of the OLS factor loading for illiquidity IML. RIV GMM (GMMd) is our robust instrumental variables approach. Shaded areas represent US recessions or crises. The OLS and GMM series are plotted on the same scale.
Fig 4.
(a) Utilities alpha for RIV GMM and OLS. (b) Utilities beta for RIV GMM and OLS. Notes: This sector has the lowest OLS beta among the 12 sectors. RIV GMM (GMMd) is our robust instrumental variables approach. Shaded areas represent US recessions or crises. The OLS and GMM series are plotted on the same scale.
Fig 5.
(a) Health alpha for RIV GMM and OLS. (b) Health beta for RIV GMM and OLS. Notes: The health sector has the lowest value of the OLS factor loading for illiquidity IML. RIV GMM (GMMd) is our robust instrumental variables approach. Shaded areas represent US recessions or crises. The OLS and GMM series are plotted on the same scale.
Fig 6.
(a) Durables alpha for RIV GMM and OLS. (b) Durables beta for RIV GMM and OLS. Notes: This sector has the highest OLS beta among the 12 sectors. RIV GMM (GMMd) is our robust instrumental variables approach. Shaded areas represent US recessions or crises. The OLS and GMM series are plotted on the same scale.
Table 5.
OLS exposures of the 12-sector portfolios to Amihud illiquidity ratio and IML in the augmented Fama and French five-factor model.
Table 6.
Parameter estimations for the conditional alpha and market beta equations via OLS by using the Amihud ratio.