臺大管理論叢 NTU Management Review VOL.29 NO.1

15 NTU Management Review Vol. 29 No. 1 Apr. 2019 Table 2 Evidence of the Illiquidity Premium – Portfolio Analysis This table summarizes the results on illiquidity premiums, measured by the average monthly return on illiquid-minus-liquid stock portfolios ( IML ). For each market, stocks are first sorted at the beginning of month t into three portfolios by the standard deviation of their daily return over the three-month period from month t -3 to t -1. Within each volatility portfolio, stocks are sorted into five equal portfolios based on their Amihud (2002) illiquidity measure calculated over the same three- month period. For each of the double-sorted portfolios we calculate the monthly portfolio average return using three averaging methods: return-weighting (using the stock’s return at the end of the previous month), value-weighting (using the stock’s market capitalization at the end of the previous month) and volume-weighting (using the monetary value of stock’s trading volume in the portfolio formation period). All returns are adjusted to be in terms of US dollars. After portfolio construction, returns are calculated for months t +1, t +2 and t +3, and the portfolio formation is repeated every three months. The liquid (illiquid) stock portfolio return is the average of the portfolio returns on the three most (least) liquid portfolios across the three volatility-sorted portfolios. IML c is the illiquid- minus-liquid portfolio return of country c . α IML,c is the risk-adjusted excess return on the illiquid-minus- liquid portfolio, obtained as the intercept from a regression of IML c,t on global and regional common risk factors, following Fama and French (1993). The mean of IML c,t and the intercept α IML,c are calculated for each country, and the cross-country statistics of these variables are presented. The t -statistics for the cross-country averages are in parentheses. The p -value is the significance level of the test that the values of IML c or α IML,c are equally likely to be positive or negative (i.e., probability of 50%). Return-weighted Method Value-weighted Method Volume-weighted Method IML c α IMLc IML c α IMLc IML c α IMLc Emerging Markets (19 countries) Mean 1.034 1.109 0.766 0.690 0.941 0.872 ( t -statistic) (9.79) (7.97) (6.77) (4.70) (6.45) (4.43) Median 1.036 1.181 0.745 0.667 0.743 0.795 % positive 100.0% 94.7% 94.7% 89.5% 100.0% 84.2% p -value 0.000 0.000 0.000 0.000 0.000 0.002 Developed Markets (26 countries) Mean 0.492 0.655 0.187 0.368 0.542 0.691 ( t -statistic) (3.14) (4.16) (1.63) (2.95) (3.67) (4.33) Median 0.286 0.371 0.152 0.102 0.389 0.367 % positive 65.4% 84.6% 61.5% 73.1% 80.8% 84.6% p -value 0.084 0.000 0.163 0.014 0.001 0.000 Global Markets (all 45 countries) Mean 0.721 0.847 0.432 0.504 0.711 0.768 ( t -statistic) (6.69) (7.53) (4.71) (5.20) (6.56) (6.22) Median 0.811 0.835 0.591 0.400 0.684 0.526 % positive 80.0% 88.9% 75.6% 80.0% 88.9% 84.4% p -value 0.000 0.000 0.000 0.000 0.000 0.000