Table 3.

Stock returns in the downmarket

Group	n	t test			Ranksum test
		Mean	Std. Error	Std. deviation	Ranksum	Expected
Panel A: firms with a decrease in implied growth wa
No decrease w	114	− 33.34	1.14	12.22	28,189	23,142
Decrease w	291	− 39.98	0.81	13.79	54,026	59,073
Combined	405	− 38.12	0.68	13.68	82,215	82,215
Difference		6.64	1.4		Prob. > z = 0.0000
		t value = 4.74			z = 4.76
Panel B: firms with an increase in discount rate kb
No decrease w	268	− 39.84	− 0.87	14.27	50,494	54,404
Decrease w	137	− 34.74	1.01	11.78	31,721	27,811
Combined	405	− 38.12	0.68	13.68	82,215	82,215
Difference		− 5.1	1.33		Prob. > z = 0.0005
		t value = −3.83			z =  − 3.51

^aThis panel shows the test for equal means of stock returns using a two-sided Student t test and a Wilcoxon ranksum test. A dummy variable taking the value of one is used for those firms with a decrease in implied growth w (Δw < 0) as computed by the Gordon (1959) formula, zero otherwise

^bThis panel shows the test for equal means of stock returns using a two-sided Student’s t test and a Wilcoxon ranksum test. A dummy variable taking the value of one is used for those firms with an increase in discount rate k (Δk > 0) as computed by the Gordon (1959) formula, zero otherwise