00Thaler_FM i-xxvi.qxd

factors, like changes in credit conditions, than firms that are financially less vulnerable. In addition, the duration of high g ...

evidence to support their claim; however, their results are not inconsistent with multifactor models, such as Merton (1973) and ...

Our results are disturbing in that, like Fama and French (1992), they sug- gest that traditional measures of risk do not determi ...

firms and market equity in the lowest quintile of NYSE firms. All returns pre- sented here are of value-weighted portfolios that ...

quintiles and the low B/M quintiles of the same size were more than 50 basis points (bp) per month over this period (except for ...

provide a concrete framework for describing some of the opposing views described in the introduction. The first model, which we ...

factor at time t. In this factor pricing model, expected returns are a linear function of all factor loadings: (2) Here, the B/M ...

The difference between this equation and equation (1) is that there is no separate distress factor f ̃D. Furthermore, we assume ...

approximate J-factor structure describes the variance-covariance matrix of returns. εi,t

(0, σ^2 ei), fj,t

(0, 1). (4) However ...

of a portfolio of stocks increases if they all simultaneously become dis- tressed. If the factor structure is stable and there i ...

will effectively net out the various sources of factor risk, and you should end up with a portfolio with an extremely small retu ...

Before looking at pre- and postformation date standard deviations we will examine the average returns of stocks included in the ...

there is a large “step” in the returns in January of the formation year. This is because the portfolios are formed based on the ...

CHARACTERISTICS AND RETURNS 331 Table 9.2 Pre-Formation Monthly Return Standard Deviations of Portfolios This table presents pre ...

in moving from formation-year 5 to 0, (and a decrease in moving from formation-year −5 to 0) but this increase is only about 10 ...

A. Construction of the Test Portfolios We first rank all NYSE firms by their B/M ratios at the end of year t−1 and their market ...

Based on these ex-ante estimates of the factor loadings we then equally divide each of the nine B/M and size sorted portfolios i ...

CHARACTERISTICS AND RETURNS 335 Table 9.3 Mean Excess Monthly Returns (in Percentage) of the 45 Portfolios Formed on the Basis o ...

336 DANIEL AND TITMAN Table 9.4 Average Book-to-Market and Size of Test Portfolios Portfolios are formed based on size (SZ), boo ...

CHARACTERISTICS AND RETURNS 337 Table 9.5 Portfolios Sorted by Characteristics and Predicted HML Factor Loadings Portfolios are ...