Liquidity and Equity Returns in Borsa Istanbul

32 Pages Posted: 14 May 2015 Last revised: 19 Sep 2016

See all articles by Yigit Atilgan

Yigit Atilgan

Sabanci University

K. Ozgur Demirtas

Sabanci University Graduate School of Management

A. Doruk Gunaydin

Sabanci University

Date Written: May 13, 2015

Abstract

We investigate the relationship between expected returns and liquidity measures in Borsa Istanbul. To do so, we gather a wide range of illiquidity measures that can be applied to the market. Firm-level cross-sectional regressions indicate that there is a positive relationship between various illiquidity measures and one-month to six-month ahead stock returns. Findings of the paper are robust after using different sample periods and controlling for well-known priced factors such as market beta, size, book-to-market and momentum. The portfolio analysis reveals that stocks that are in the highest illiquidity quintile earn 7.2% to 19.2% higher annual returns than those in the lowest illiquidity quintile.

Keywords: liquidity, emerging markets, equity returns, asset pricing

JEL Classification: G10, G11, G12

Suggested Citation

Atilgan, Yigit and Demirtas, K. Ozgur and Gunaydin, A. Doruk, Liquidity and Equity Returns in Borsa Istanbul (May 13, 2015). Applied Economics, Vol. 48, No. 52, 2016, Available at SSRN: https://ssrn.com/abstract=2605791 or http://dx.doi.org/10.2139/ssrn.2605791

Yigit Atilgan (Contact Author)

Sabanci University ( email )

Orta Mahalle Üniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
Turkey

K. Ozgur Demirtas

Sabanci University Graduate School of Management ( email )

Sabanci University, School of Management
Orhanli Tuzla
Orhanlı-Tuzla, Istanbul, 34956
Turkey
(+90) 216-483-9985 (Phone)
(+90) 216-483-9699 (Fax)

A. Doruk Gunaydin

Sabanci University ( email )

School of Management
Orhanli Tuzla
İstanbul, 34956
Turkey

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