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Illiquid Asset Investing

50 Pages Posted: 13 Jan 2013  

Andrew Ang

BlackRock, Inc

Date Written: January 13, 2013

Abstract

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.

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

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

Suggested Citation

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

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
United States

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