Is idiosyncratic risk ignored in asset pricing: Sri Lankan evidence?

Future Business Journal

Table 8 Fama–Macbeth’s cross-sectional regression result

	Parameters	λ₀	λ_rm	λ_lvmhv	Adjusted R²	F-statistics(P value)
Two factors with market and idiosyncratic volatility
MC	Mean	0.025	− 0.005	− 0.004	23.8	0.468	0.665
	SD	0.314	0.166	0.024
	T-statistics	0.787	− 0.269	− 1.475
PB	Mean	0.049	− 0.017	0.002	44.2	1.187	0.417
	SD	0.316	0.168	0.042
	T-statistics	1.498	− 0.966	0.530
IVOL	Mean	− 0.019	0.018	− 0.001	42.1	1.091	0.441
	SD	0.345	0.181	0.010
	T-statistics	− 0.540	0.941	− 0.839

	Parameters	λ₀	λ_rm	λ_smb	λ_lmh	Adjusted R²	F-statistics (P value)
Fama–French three factor
MC	Mean	0.028	− 0.006	0.005	0.005	41.1	0.466	0.736
	SD	0.323	0.170	0.043	0.032
	T-statistics	0.838	− 0.365	1.214	1.516
PB	Mean	0.062	− 0.023	0.001	0.001	66	1.292	0.464
	SD	0.396	0.207	0.009	0.012
	T-statistics	1.526	− 1.108	0.966	0.519
IVOL	Mean	0.008	0.004	− 0.004	− 0.001	44.2	0.527	0.706
	SD	0.504	0.259	0.035	0.042
	T-statistics	0.155	0.164	− 1.001	− 0.124

	Parameters	λ₀	λ_rm	λ_smb	λ_lvmhv	Adjusted R²	F-statistics (P value)
Three factors with idiosyncratic volatility
MC	Mean	0.035	− 0.011	0.010	− 0.003	80.8	2.809	0.273
	SD	0.315	0.167	0.037	0.024
	T-statistics	1.091	− 0.617	2.573*	− 1.357
PB	Mean	0.047	− 0.016	0.001	0.002	62.5	1.110	0.506
	SD	0.316	0.168	0.008	0.062
	T-statistics	1.461	− 0.926	0.966	0.242
IVOL	Mean	0.003	0.007	− 0.002	− 0.001	43.9	0.521	0.709
	SD	0.693	0.346	0.069	0.012
	T-statistics	0.038	0.192	− 0.345	− 0.585

	Parameters	λ₀	λ_rm	λ_smb	λ_lmh	λ_lvmhv	Adjusted R²	F-statistics (P value)
Four factors
MC	Mean	0.041	− 0.012	0.003	0.008	− 0.005	98.9	22.012	0.158
	SD	0.319	0.168	0.041	0.033	0.025
	T-statistics	1.252	− 0.712	0.811	2.264*	− 2.017
PB	Mean	0.065	− 0.025	0.001	0.001	0.001	66.2	0.490	0.774
	SD	0.458	0.239	0.008	0.012	0.083
	T-statistics	1.393	− 1.033	0.965	0.511	0.106
IVOL	Mean	− 0.005	0.011	− 0.002	0.000	− 0.001	44.8	0.203	0.910
	SD	0.842	0.423	0.070	0.048	0.012
	T-statistics	− 0.053	0.243	− 0.330	− 0.042	− 0.585