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Illiquid Asset Investing

Andrew Ang

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

January 13, 2013

Columbia Business School Research Paper No. 13-2

After taking into account biases induced by infrequent trading and selection, it is unlikely that illiquid asset classes have higher risk-adjusted returns than traditional liquid stock and bond markets. On the other hand, there are significant illiquidity premiums within asset classes. Portfolio choice models incorporating illiquidity risk recommend only modest holdings of illiquid assets. Investors should demand high risk premiums for investing in illiquid assets.

Number of Pages in PDF File: 50

Keywords: illiquidity premium, asset allocation, portfolio choice, endowment management, Swensen model

JEL Classification: D91, G11, G12, G23, G24

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Date posted: January 13, 2013  

Suggested Citation

Ang, Andrew, Illiquid Asset Investing (January 13, 2013). Columbia Business School Research Paper No. 13-2. Available at SSRN: http://ssrn.com/abstract=2200161 or http://dx.doi.org/10.2139/ssrn.2200161

Contact Information

Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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