Liquidity and the Cross-Section of International Stock Returns

38 Pages Posted: 2 Mar 2020 Last revised: 20 Mar 2021

See all articles by Nusret Cakici

Nusret Cakici

Fordham university

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business; University of Cape Town

Date Written: January 16, 2020


We perform a comprehensive investigation of the illiquidity premium in international stock markets. We examine several established liquidity measures in 45 countries for the years 1990–2020. Our findings provide convincing evidence that liquidity pricing depends strongly on firm size. Although the premium is globally present, it exists only among microcap stocks, which have negligible economic significance. Outside the microcap universe, virtually no liquidity effect can be observed.

Keywords: illiquidity premium, liquidity effect, international markets, microcaps, Amihud’s measure, turnover ratio, bid-ask spread, zero-return days, asset pricing, return predictability

JEL Classification: G12, G15

Suggested Citation

Cakici, Nusret and Zaremba, Adam, Liquidity and the Cross-Section of International Stock Returns (January 16, 2020). Journal of Banking and Finance, Forthcoming, Available at SSRN: or

Nusret Cakici (Contact Author)

Fordham university ( email )

113 West 60th Street
New York, NY 10023
United States
2017473227 (Phone)
07446 (Fax)

Adam Zaremba

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000


Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875

University of Cape Town

Cape Town
South Africa

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