Posted: 18 Feb 2010
Date Written: February 16, 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
Suggested Citation: Suggested Citation
Kamara, Avraham and Lou, Xiaoxia and Sadka, Ronnie, Has the U.S. Stock Market Become More Vulnerable Over Time? (February 16, 2010). Financial Analysts Journal, Vol. 66, No. 1, 2010. Available at SSRN: https://ssrn.com/abstract=1553825