The financials sector has the highest average market value and the lowest
average PE ratio.
The correlations in panel B of Table 1 range between 0.222 and 0.860. Most
of the correlations are in excess of 0.6 but there are some interesting
observations. The information technology sector stands out sharply from the
other sectors in that it has a small positive correlation with virtually all other
Table 1. Summary Statistics of Industry Portfolios.
Panel A
Mean Std
Deviation
Size DY PE
1 Resources 0.643 6.457 44,280 5.145 16.90
2 Basic 0.248 6.119 30,031 5.243 12.931
3 General 0.494 6.379 23,018 3.991 14.172
4 Cyc CG 0.073 7.913 3,003 5.762 14.073
5 Ncyc CG 0.676 5.344 69,252 4.422 13.941
6 Cyc Ser 0.541 5.611 73,082 4.039 15.95
7 Ncyc Ser 1.107 6.148 43,952 3.385 17.554
8 Info Tech 0.807 9.321 3,974 3.443 28.01
9 Financials 0.596 5.736 84,226 4.827 11.981
10 Telecom, Media 0.832 6.533 55,038 4.159 16.296
Panel B Correlations
123456789
2 0.600
3 0.544 0.848
4 0.460 0.754 0.669
5 0.506 0.759 0.707 0.622
6 0.545 0.860 0.847 0.699 0.776
7 0.356 0.600 0.615 0.419 0.644 0.741
8 0.222 0.294 0.386 0.323 0.266 0.389 0.348
9 0.599 0.798 0.738 0.652 0.800 0.799 0.632 0.273
10 0.440 0.726 0.710 0.618 0.680 0.838 0.838 0.433 0.698
Note: Summary statistics of the excess returns and characteristics of 10 U.K. industry portfolios
are estimated between February 1976 and April 2000. Panel A includes the mean and standard
deviation (monthly %) of monthly excess returns as well as the average value of the industry
characteristics in terms of market value (Size – £m), dividend yield (DY) and price-earnings ratio
(PE). Panel B reports the correlations between the 10 portfolios.
259Characteristics Versus Covariances

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