Table 8.
Global Financial Crisis (GFC): change in the Gordon factors and stock return downmarket analysis
| (1) | (2) | (3) | (4) | (5) | |
|---|---|---|---|---|---|
| Return in downmarket | Gordon | Gordon | Gordon | Gordon | Gordon k |
| µ = 35.02%, σ = 17.34% | k | w | 1 − b | k and w | w and 1 − b |
| Δk | 106.9*** | − 443.8*** | − 652.2*** | ||
| (0.258) | (− 1.069) | (− 1.571) | |||
| Δw | 116.8*** | 541.6*** | 778.9*** | ||
| (0.290) | (1.347) | (1.937) | |||
| Δ1 − b | − 1.296 | 34.22** | |||
| (− 0.00870) | (0.230) | ||||
| Consumer discretionary | − 1.423 | − 1.162 | − 1.014 | − 0.00228 | 0.439 |
| (− 0.0274) | (− 0.0224) | (− 0.0195) | (− 4.39e− 05) | (0.00845) | |
| Consumer staples | 11.70** | 11.71** | 13.32** | 12.59** | 12.39** |
| (0.189) | (0.190) | (0.216) | (0.204) | (0.201) | |
| Energy | − 8.095 | − 7.596 | − 11.79** | − 7.692 | − 7.229 |
| (− 0.137) | (− 0.129) | (− 0.200) | (− 0.131) | (− 0.123) | |
| Financials | 2.011 | 1.777 | 2.759 | 1.306 | 0.658 |
| (0.0391) | (0.0346) | (0.0537) | (0.0254) | (0.0128) | |
| Health care | 8.655* | 8.405* | 9.460* | 7.908 | 7.405 |
| (0.175) | (0.170) | (0.191) | (0.160) | (0.150) | |
| Industrials | 2.241 | 3.093 | 1.009 | 5.512 | 5.040 |
| (0.0412) | (0.0569) | (0.0186) | (0.101) | (0.0927) | |
| Information technology | − 0.264 | 0.00336 | − 2.136 | − 0.0403 | − 2.182 |
| (− 0.00540) | (6.86e− 05) | (− 0.0436) | (− 0.000822) | (− 0.0445) | |
| Materials | 3.808 | 4.457 | 3.353 | 6.533 | 5.205 |
| (0.0537) | (0.0629) | (0.0473) | (0.0921) | (0.0734) | |
| Real Estate | 3.216 | 4.099 | 7.320* | 9.538* | 17.05*** |
| (0.0105) | (0.0133) | (0.0238) | (0.0310) | (0.0555) | |
| Utilities | 8.842* | 9.127* | 11.15** | 11.35** | 11.94** |
| (0.102) | (0.105) | (0.128) | (0.131) | (0.137) | |
| Constant | − 34.87*** | − 34.31*** | − 37.10*** | − 33.44*** | − 32.13*** |
| Observations | 313 | 313 | 313 | 313 | 313 |
| Adjusted R2 | 0.179 | 0.195 | 0.119 | 0.219 | 0.252 |
This table shows the effect of the change in the Gordon factors on stock returns during the market downturn induced by the Lehman Brothers bankruptcy filing, losses measured for the period August 29, 2008 through December 12, 2008. Columns (1) through (3) show the result of simple ordinary least-squares (OLS) regressions of stock returns on the change in discount rate, Δk, implied growth, Δw, and the payout ratio, Δ1 − b over the period starting August 29, 2008 and ending December 29, 2008. Columns (4) and (5) show the results using multiple OLS. Robust normalized beta coefficients are shown in parenthesis. These indicate the effect size of the Gordon factors and tell how much of a standard deviation in stock returns change for each standard deviation change in the Gordon factors. We use industry categorical variables to account for industry fixed effects. The communication services industry is used as the base and the factor results and beta weights for industries are shown as differences to this base
Significance is denoted by ***p<0.01, **p<0.05, *p<0.1