Journal
REVIEW OF FINANCIAL STUDIES
Volume 34, Issue 4, Pages 2101-2123Publisher
OXFORD UNIV PRESS INC
DOI: 10.1093/rfs/hhaa080
Keywords
-
Categories
Ask authors/readers for more resources
Lou and Shu decompose Amihud's illiquidity measure ILLIQ and find that a component related to illiquidity significantly affects stock returns. The ILLIQ premium remains positive after controlling for mispricing, sentiment, and seasonality. Additionally, the aggregate market ILLIQ outperforms market IDVOL in estimating the impact of market illiquidity shocks on realized stock returns.
Lou and Shu decompose Amihud's illiquidity measure (ILLIQ) proposing that its component, the average of inverse dollar trading volume (IDVOL), is sufficient to explain the pricing of illiquidity. Their decomposition misses a component of ILLIQ that is related to illiquidity. We find that this component affects stock returns significantly, both in the cross-section and in time-series. We show that the ILLIQ premium is significantly positive after controlling for mispricing, sentiment, and seasonality. In addition, the aggregate market ILLIQ outperforms market IDVOL in estimating the effect of market illiquidity shocks on realized stock returns.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available