Liquidity Risk and Expected Stock Returns

Topics:
Equity,
Financial Research
Tags:
Finance,
Investment,
Liquidity,
Stock
Source:
Knowledge@Wharton

FREE Registration is required

Overview: This study investigates whether market-wide liquidity is a state variable important for asset pricing. The author finds that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. The monthly liquidity measure, an average of individual-stock measures estimated with daily data, relies on the principle that order flow induces greater return reversals when liquidity is lower. Over a 34-year period, the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities by 7.5% annually, adjusted for exposures to the market return as well as size, value, and momentum factors.

(Is this item miscategorized? Does it need more tags? Let us know.)

Format: HTML & PDF | Size: 386KB | Date: Aug 2001 | Pages: 39

People who downloaded this item also downloaded

White Paper Measuring Liquidity Risk

Top results from Financial Research

White Paper Looking for a fast payback? 10 Minutes with Free Tool Can Save Thousands
Webcast Webcast: Smart Techniques for application security: whitebox + blackbox testing.
Download Deduplication Calculator
Case Study TAC Prepared for Aggressive Growth with Microsoft Office PerformancePoint Server 2007
White Paper Establishing the business value of portal for telecommunications- business value assessment discussion

» View all Financial Research listings

advertisement
advertisement
  • Click Here
  • Click Here
  • Click Here
advertisement

Returning users: Log In Here!

Already registered on BNET, TechRepublic, or ZDNet? Simply log in.

Free Membership: Sign Up Now!

Sign up for a free membership today and get instant and unlimited access to one of the largest databases of white papers, webcasts, and casestudies anywhere. Your FREE membership allows you to:

  • Download an unlimited amount of content, including classic and current white papers, case studies, webcasts and more
  • Track content on your chosen topics of interest
  • Receive targeted email alerts when your favorite content is added
  • Save content for future reading
  • Receive our member newsletter

When you register to access this directory, you become a member of BNET. In addition, you allow us to share your information with companies that produce products or services featured in the library--so that such companies may contact you with information and offers regarding their products and services. This enables us to keep the library a free service. As a directory registrant, you will receive a complimentary subscription to the BNET member newsletter, The BNET Report. You can unsubscribe from this newsletter at any time. By clicking the Sign up button, you indicate that you agree to our Terms and Conditions and have read and understand our Privacy Policy (updated).