Abstract
Using the new CRSP compilation of daily trading volume data from 1926 to 1962, this paper conducts a detailed analysis of liquidity from 1926 to 2005. It distinguishes liquidity risk from liquidity as a characteristic and presents new evidence on the importance of liquidity risk in asset pricing. The liquidity risk premium is as strong in the pre-1963 period as in the post 1963-period, and is the most significant and persistent premium in a comparison with size, value, and momentum premiums. Liquidity as a firm characteristic lacks significant predictive power beyond liquidity risk and the liquidity-augmented CAPM provides a good description of expected returns.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
