Liquidity Factor Sample Clauses

Liquidity Factor. P´astor and ▇▇▇▇▇▇▇▇▇ (2003) show that expected stock returns are related cross- sectionally to the sensitivities of the returns to fluctuations in aggregate liquidity. We introduce the liquidity factor to capture such an effect, in addition to the market, size, value, and momentum factors. Table 11 shows the SD test results for risk adjusted returns based on a five-factor model. The result is similar to what we have before. 10Carhart (1997), ▇▇▇▇▇ and ▇▇▇▇▇▇ (2006), and ▇▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇ (1996, 2011). After controlling for the market risk premium, size, value, momentum, and liquidity factors, the risk adjusted returns of aggressive funds are dominated by all of the other three classes of mutual funds by second order stochastic dominance. Also, the risk adjusted returns of growth & income funds dominate all of the other three classes of mutual funds by second order stochastic dominance.