It is interesting to compare the economic magnitudes implied by Table 11 to those in our earlier tables. Think of two equal-sized firms, one with the SUB1 median coverage of 0.1 (from Table 4), the other with the SUB3 median coverage of 7.6. According to the Fama-MacBeth coverage-term estimate of -0.0125 in Panel A of Table 11, the SUB1 firm should have a serial correlation coefficient that is .026 higher than that of the SUB3 firm. (,0125x(log(8.6)-log(l .1)) = .026) When one combines this with the observation that the past return differential between PI and P3 stocks is approximately 60%, this implies that a P3-P1 momentum strategy should be expected to return 1.56% more over six months for the SUB1 firm, (.026×60% = 1.56%), or about 0.25% per month extra. This is very much in the same ballpark as—albeit a bit smaller than—the SUB1/SUB3 differential of 0.42% per month reported in Table 4.
A similar calculation based on the interactive specification in Panel В can be used to back out the implied momentum differentials for firms in varying size classes. For example, consider the smallest class of firms (those between the 20th and 40th NYSE/AMEX percentiles) in the first column of Table 5, which have a mean market cap of around $60 million. Comparing a SUB1 firm in this class with median coverage of 0.0 to a SUB3 firm with median coverage of 3.1, the Fama-MacBeth coefficients in Panel В imply that a momentum strategy will return 3.91% more over six months for the SUB1 firm, or roughly 0.60% per month extra. This is again roughly in line with—although in this case somewhat larger than—the analogous number of 0,36% reported in Table 5.
Overall then, Table 11 provides further comfort as to the robustness of our central results. Even with a very different measurement approach, we get not only the same qualitative outcome—higher six-month return autocorrelations among lower-coverage stocks—but remarkably comparable economic magnitudes.