Illiquidity and Stock Returns: A Revisit
Critical Finance Review, Forthcoming
24 Pages Posted: 3 Oct 2018
Date Written: July 30, 2018
This paper explains and extends my 2002 paper. It presents a return factor of illiquid-minus-liquid stocks, called IML, which provides a time series of the illiquidity premium. The risk-adjusted predicted return on IML is lower in the period that follows my 2002 paper but it is still significant. IML also has the predicted response to market illiquidity shocks.
Keywords: Liquidity Pricing
JEL Classification: G10, G12
Suggested Citation: Suggested Citation