Note that the measures of locked-in gains, FYL and EWGO are highly correlated with the cumulative return with correlations of 0.
In Panel A of Table VII, I include the FYL winner and loser indicator variables as controls in the baseline regression specification of Table III.
After controlling for the FYL winner (Panel A), as well the equally weighted gain only winner (Panel B), the intangible return winner portfolios have negative and statistically significant returns in each of the five years in the holding period, with and without the January returns.
On the other hand, the FYL winner portfolio has very limited ability to forecast returns in the presence of intangible information measures.
Interestingly, in the presence of intangible information and growth measures, the FYL winner portfolio does not earn statistically significant returns in any of the years during the holding period.
I obtain very similar results using the equally weighted gain only measure instead of the FYL measure (Panel B).
For both the FYL measure and the equally weighted gain only measure, I determine that the alphas for the intangible return winners and the composite share issuance winners are negative in all years and are mostly statistically significant.
11k], the coefficient on the interaction between the FYL winner variable and the Tax_Regime variable.
As before, I find that the FYL winner variable explains away the cumulative return winner reversals.
In addition to the FYL measure and the equally weighted gain only measure, George and Hwang (2007) also propose an equally weighted gain and loss measure (EWGL) to capture locked-in capital gains.