Liquidity Risk and Stock Returns: A Return Decomposition Approach

2012 ◽  
Author(s):  
Shaun A. Bond ◽  
Qingqing Chang
Keyword(s):  
Stock Returns ◽  
Liquidity Risk ◽  
Decomposition Approach ◽  
Return Decomposition

scholarly journals Pricing Liquidity Risk with Heterogeneous Investment Horizons

2020 ◽  
pp. 1-36 ◽  
Author(s):  
Alessandro Beber ◽  
Joost Driessen ◽  
Anthony Neuberger ◽  
Patrick Tuijp
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Liquidity Risk ◽  
Asset Returns ◽  
Spillover Effects ◽  
Expected Returns ◽  
Pricing Model ◽  
Liquidity Premium ◽  
Asset Pricing Model ◽  
Illiquid Asset

We develop an asset pricing model with stochastic transaction costs and investors with heterogeneous horizons. Depending on their horizon, investors hold different sets of assets in equilibrium. This generates segmentation and spillover effects for expected returns, where the liquidity (risk) premium of illiquid assets is determined by investor horizons and the correlation between liquid and illiquid asset returns. We estimate our model for the cross-section of U.S. stock returns and find that it generates a good fit, mainly due to a combination of a substantial expected liquidity premium and segmentation effects, while the liquidity risk premium is small.

scholarly journals LIQUIDITY RISK AND STOCK RETURN IN LATIN AMERICAN EMERGING MARKETS

2021 ◽  
Vol 20 (2) ◽  
Author(s):  
Francisco Javier Vasquez-Tejos ◽  
Prosper Lamothe Fernandez
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Latin American ◽  
Stock Return ◽  
Risk Measures ◽  
Liquidity Risk ◽  
Multiple Regression Model ◽  
Investment Strategies ◽  
Developed Markets ◽  
The Impact

This study analyzes the impact of liquidity risk on stock returns in four Latin American markets (Chile, Columbia, Mexico, and Peru) between January 1998 and July 2018. Several previous studies have focused on measuring this effect in developed markets and a few in emerging markets, such as Latin American stock markets. In the present study, five liquidity risk measures with a multiple regression model; three have been widely used in previous studies and two were from recently proposed measures. We found evidence of an inverse relationship between liquidity risk and stock performance, which indicates that there exist rewards for investing in less liquid positions and therefore originate new investment strategies. In general, lesser developed or smaller markets have a disadvantage for this type of study, due to lack of access to historical information on stock purchase and sales.

scholarly journals Stock returns and liquidity risk in Chile

2019 ◽  
Vol 17 (2) ◽  
Author(s):  
Francisco Javier Vásquez-Tejos ◽  
Hernán Pape-Larre ◽  
Juan Martín Ireta-Sánchez
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Regression Model ◽  
Stock Returns ◽  
Multiple Regression ◽  
Risk Measures ◽  
Liquidity Risk ◽  
Multiple Regression Model ◽  
Developed Markets ◽  
The Impact

This study analyzes the impact of liquidity risk on the return of shares in the Chilean stock market, during the period from January 2000 to July 2018. A large number of studies have focused on measuring this effect in developed markets and few in emerging markets, especially the Chilean one. To do this, we used 6 risk measures in a multiple regression model; four widely used in previous studies and two new proposed measures. We found evidence of the significance of the liquidity risk over the stock return.RESUMENEste estudio analiza el impacto del riesgo de liquidez sobre el retorno de las acciones en el mercado bursátil chileno, durante el periodo de enero de 2000 hasta julio de 2018. Gran cantidad de estudios se han centrado en medir este efecto en los mercados desarrollados y pocos en mercados emergentes, especialmente el chileno. Para ello, se utilizó un modelo de regresión múltiple 6 medidas de riesgo; cuatro utilizadas ampliamente en estudios anteriores y dos medidas nuevas propuestas. Encontramos evidencia de significancia del riesgo de liquidez sobre el retorno accionario.RESUMOEste estudo analisa o impacto do risco de liquidez no retorno das ações no mercado de ações chileno, durante o período de janeiro de 2000 a julho de 2018. Muitos estudos têm se concentrado em medir este efeito em mercados desenvolvidos e poucos nos mercados emergentes, especialmente o chileno. Para isso, utilizamos 6 medidas de risco em um modelo de regressão múltipla; quatro amplamente utilizados em estudos anteriores e duas novas medidas propostas. Encontramos evidências da significância do risco de liquidez sobre o retorno das ações.  

Liquidity Risk and Expected Stock Returns in Korea: A New Approach

2012 ◽  
Vol 41 (6) ◽  
pp. 704-738 ◽  
Author(s):  
Jeewon Jang ◽  
Jangkoo Kang ◽  
Changjun Lee
Keyword(s):  
Stock Returns ◽  
Liquidity Risk ◽  
New Approach ◽  
Expected Stock Returns
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