The Illiquidity Premium: International Evidence

52 Pages Posted: 28 Jan 2013 Last revised: 27 Jan 2016

See all articles by Yakov Amihud

Yakov Amihud

New York University - Stern School of Business

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Wenjin Kang

Renmin University of China - Hanqing Institute

Huiping Zhang

James Cook University - College of Business, Law and Governance,

Abstract

Examining the illiquidity premium in stock markets across 45 countries, we find the following. First, the average illiquidity return premium across countries is positive and significant, after controlling for other pricing factors. The premium is measured by monthly return series on illiquid-minus-liquid stocks or by the coefficient of stock illiquidity estimated from cross-section Fama-MacBeth regressions. Second, there is a commonality across countries in the illiquidity return premium, controlling for common global return factors and variation in global illiquidity. This commonality is different from commonality in illiquidity itself and is greater in globally-integrated markets.

Keywords: Illiquidity Premium, International Markets, Commonality in Illiquidity Premium

JEL Classification: G12, G15, F30

Suggested Citation

Amihud, Yakov and Hameed, Allaudeen and Kang, Wenjin and Zhang, Huiping, The Illiquidity Premium: International Evidence. Journal of Financial Economics (JFE), Vol. 117, No. 2, 2015. Available at SSRN: https://ssrn.com/abstract=2207810 or http://dx.doi.org/10.2139/ssrn.2207810

Yakov Amihud

New York University - Stern School of Business ( email )

44 West 4th Street
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United States
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212-995-4233 (Fax)

Allaudeen Hameed (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://www.bschool.nus.edu.sg/staff_profile/cv.asp?ID=3

Wenjin Kang

Renmin University of China - Hanqing Institute ( email )

59 Zhongguancun Street
Beijing, 100872
China

Huiping Zhang

James Cook University - College of Business, Law and Governance, ( email )

Singapore
Singapore

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