Campbell, John Y, Jens Hilscher and Jan Szilagyi, 2005.

Table 7: Double sorting on size and distressThis table reports mean excess returns over the market and 3-factor alphas for portfolios sorted on size (ME)and fitted 12-month fitted probability of failure (Phat). We first sort stocks into size quintiles using NYSEbreakpoints (following Fama-French) and then, within each quintile, sort stocks into predicted failure probabilityquintiles. All returns are in annualized percent units.Panel A - mean excess returnME\Phat Low High Low - HighLarge 3.94 -1.48 -0.27 0.43 0.93 3.01(2.02)* (1.18) (0.18) (0.29) (0.41) (0.77)4.14 0.29 2.07 0.80 1.10 3.04(2.03)* (0.20) (1.42) (0.59) (0.43) (0.78)4.65 2.98 -0.22 1.04 0.43 4.22(2.01)* (1.54) (0.15) (0.65) (0.17) (1.25)6.21 2.56 1.68 1.11 -2.40 8.62(2.51)* (1.21) (0.80) (0.57) (0.86) (2.91)**Small 3.77 -0.30 -3.38 -5.96 -10.62 10.87(2.18)* (1.27) (1.20) (0.29) (1.22) (3.07)**Large - Small -1.39 -4.63 -3.15 -0.43 6.47(0.48) (1.47) (0.97) (0.12) (1.33)Panel B - 3-factor alphaME\Phat Low High Low - HighLarge 7.51 0.30 0.39 -1.58 -4.08 11.59(4.83)** (0.27) (0.35) (1.40) (2.42)* (4.07)**6.20 0.97 1.48 -0.58 -5.37 11.57(3.96)** (0.78) (1.05) (0.48) (2.82)** (4.05)**6.13 4.10 -1.15 -0.87 -5.84 11.97(4.02)** (3.11)** (1.02) (0.69) (3.85)** (5.02)**6.70 2.51 0.65 -0.93 -8.52 15.22(5.06)** (2.07)* (0.58) (0.85) (5.89)** (7.07)**Small 5.30 2.96 1.11 -3.02 -12.19 17.49(4.36)** (2.41)* (0.93) (1.87) (4.15)** (5.81)**Large - Small 2.21 -2.66 -0.71 1.44 8.11(1.23) (1.63) (0.45) (0.75) (2.61)**