Has the U.S. Stock Market Become More Vulnerable Over Time?
University of Washington - Michael G. Foster School of Business
University of Delaware - Alfred Lerner College of Business and Economics
Boston College - Carroll School of Management
February 16, 2010
Financial Analysts Journal, Vol. 66, No. 1, 2010
This study demonstrates that the cross-sectional variation of systematic risk and systematic liquidity has increased from 1963 to 2008. Both have increased significantly for large-capitalization companies but have declined significantly for small-cap companies. These findings have several implications for investment managers, including the declining ability to diversify return volatilities and liquidity shocks by holding liquid, large-cap stocks. The findings suggest that the vulnerability of the U.S. equity market to unanticipated events has increased over the past few decades.
Keywords: Equity Investments, Investment Industry, Historical Trends, Portfolio Management, Portfolio Construction, Rebalancing, and Implementation, Risk Measurement and Management, Equity Portfolios
Date posted: February 18, 2010
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