BetaLiquidityPS · Liquidity · Pastor and Stambaugh (2003)

Pastor-Stambaugh liquidity beta

Long minus short decile portfolio, value-weighted, market-adjusted. Quarterly, 1963Q1 to 2024Q4.

Expected return · posterior mean, % per year, averaged over the window

Next quarter

2026Q4

0.28%

95% interval −3.60% to 4.53%

Next year

2026Q4–2027Q3

0.31%

95% interval −3.65% to 4.57%

Next five years

2026Q4–2031Q3

0.46%

95% interval −3.88% to 4.81%

Forecast made 16 Sep 2026, conditioning on this portfolio's OAP returns, which end 2024Q4. The 7 quarters between then and 2026Q4 are unobserved and are integrated out under the model.

Cumulative market-adjusted return

+105% since 1963Q1 · log scale

Past performance, annualized

Window	Mean	Vol.	Sharpe	t
1963Q1–2024Q4	0.51%	10.16%	0.05	0.39
2020Q1–2024Q4	−5.14%	9.38%	−0.55	−1.22
2024Q1–2024Q4	12.93%	12.82%	1.01	1.01
1963Q1–2024Q4	0.51%	10.16%	0.05	0.39
2020Q1–2024Q4	−5.14%	9.38%	−0.55	−1.22
2024Q1–2024Q4	12.93%	12.82%	1.01	1.01
1963Q1–2024Q4	2.16%	14.17%	0.15	1.19
2020Q1–2024Q4	−4.68%	13.83%	−0.34	−0.76
2024Q1–2024Q4	23.71%	12.72%	1.86	1.86
1963Q1–2024Q4	2.16%	14.17%	0.15	1.19
2020Q1–2024Q4	−4.68%	13.83%	−0.34	−0.76
2024Q1–2024Q4	23.71%	12.72%	1.86	1.86

Forecast Sharpe ratio, annualized

Window	Mean	95% interval	P(neg)
2026Q4	−0.04	−0.33 – 0.25	0.61
2026Q4–2027Q3	−0.04	−0.31 – 0.24	0.60
2026Q4–2031Q3	−0.02	−0.26 – 0.24	0.57
2026Q4	−0.04	−0.33 – 0.25	0.61
2026Q4–2027Q3	−0.04	−0.31 – 0.24	0.60
2026Q4–2031Q3	−0.02	−0.26 – 0.24	0.57
2026Q4	0.02	−0.26 – 0.32	0.46
2026Q4–2027Q3	0.02	−0.24 – 0.31	0.45
2026Q4–2031Q3	0.03	−0.21 – 0.30	0.42
2026Q4	0.02	−0.26 – 0.32	0.46
2026Q4–2027Q3	0.02	−0.24 – 0.31	0.45
2026Q4–2031Q3	0.03	−0.20 – 0.30	0.42