Light a lamp and look at the stock market

Financial Innovation

Table 3 Light a lamp, downside risk and returns

Variables	(1)	(2)	(3)	(4)	(5)
Variables	Returns_t+1	Returns_t+2	Returns_t+3	Returns_t+4	Returns_t+5
Event*DS_Beta	0.0322***	0.0219***	0.0237***	− 0.000981	0.0112***
Event*DS_Beta	(0.00655)	(0.00350)	(0.00370)	(0.00382)	(0.00348)
Past returns	− 0.0120	0.0755***	0.0714***	0.0369***	0.0899***
Past returns	(0.00744)	(0.00602)	(0.00573)	(0.00533)	(0.00584)
Event	0.490	− 0.795***	0.352	− 2.338***	1.555***
Event	(0.434)	(0.262)	(0.295)	(0.291)	(0.275)
DS_Beta	− 0.00344***	− 0.00262***	− 0.00279***	− 0.00187***	− 0.00240***
DS_Beta	(0.000691)	(0.000671)	(0.000692)	(0.000714)	(0.000698)
Age	0.0943***	0.0812***	0.0780***	0.0802**	0.0840***
Age	(0.0291)	(0.0288)	(0.0298)	(0.0313)	(0.0303)
Size	− 0.0921***	0.0719***	0.0902***	0.117***	0.124***
Size	(0.0207)	(0.0224)	(0.0238)	(0.0266)	(0.0270)
P/E	− 0.000183	− 0.000402	− 0.000601*	− 0.000710**	− 0.000809**
P/E	(0.000301)	(0.000302)	(0.000307)	(0.000343)	(0.000349)
P/B	0.00145	0.0157***	0.0182***	0.0219***	0.0220***
P/B	(0.00272)	(0.00298)	(0.00326)	(0.00360)	(0.00354)
Turnover	0.103***	0.0267	− 0.0380	− 0.00601	− 0.00360
Turnover	(0.0251)	(0.0232)	(0.0241)	(0.0246)	(0.0248)
MarketCap	0.0374*	− 0.102***	− 0.0992***	− 0.144***	− 0.152***
MarketCap	(0.0198)	(0.0213)	(0.0226)	(0.0252)	(0.0254)
ROA	0.578**	1.415***	1.511***	1.735***	1.595***
ROA	(0.290)	(0.312)	(0.330)	(0.361)	(0.346)
Debt	− 0.0338	− 0.209*	− 0.224*	− 0.244*	− 0.277*
Debt	(0.0974)	(0.113)	(0.123)	(0.139)	(0.147)
Constant	− 2.755***	− 0.959***	− 2.129***	− 0.331**	− 0.614***
Constant	(0.159)	(0.156)	(0.158)	(0.167)	(0.165)
Observations	53,099	49,769	48,304	46,875	45,469

This table shows the estimation result of \(r_{i,t + k} = \alpha + \beta Event_{t} + \gamma {\text{DS}}\_{\text{Beta}}_{i,t} + \delta Event_{t} *{\text{DS}}\_{\text{Beta}}_{i,t} + Controls + \varepsilon_{i,t + k}\) to explore the differential effect of light a lamp event on the stocks with different downside risk. Event is a dummy variable that takes value 1 for the post-event trading day; zero otherwise. DS_Beta is downside beta-proxy for downside risk. Controls include past returns, price-to-earnings ratio (P/E), price-to-book value ratio (P/B), log of turnover (Turnover) and log of market capitalization (MarketCap), log of total assets (Size), age of the firm measured by the log of number of years since incorporated (Age), return on asset measured by the ratio of profit after tax to total assets ROA, and debt of the firm measured by the ratio of total debt to total asset (Debt). Robust standard errors in parentheses ***p < 0.01, **p < 0.05, *p < 0.1.