Has the U.S. Stock Market Become More Vulnerable over Time ?

This study demonstrates that the cross-sectional variation of systematic risk and
systematic liquidity has increased from 1963 to 2008. Both have increased
significantly for large-capitalization companies but have declined significantly
for small-cap companies. These findings have several implications for investment
managers, including the declining ability to diversify return volatilities and
liquidity shocks by holding liquid, large-cap stocks. The findings suggest that
the vulnerability of the U.S. equity market to unanticipated events has
increased over the past few decades.