|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26419
|
| Title: | Liquidity Premia in Dynamic Bargaining Markets |
| Authors: | Weill, Pierre-Olivier |
| Keywords: | Liquidity premia
Search |
| Issue Date: | 3-May-2005 |
| Series/Report no.: | FIN-05-018 |
| Abstract: | This paper develops a search-theoretic model of the cross-sectional
distribution of asset returns, abstracting from risk premia and focusing
exclusively on liquidity. I derive a float-adjusted return model
(FARM),explaining the pricing of liquidity with a simple linear formula:
In equilibrium, the liquidity spread of an asset is proportional to the
inverse of its free float, the portion of its market capitalization
available for sale. This suggests that the free float is an appropriate
measure of liquidity, consistent with the linear specifications commonly
estimated in the empirical literature.The qualitative predictions of the
model corroborate much of the empirical evidence. |
| URI: | http://hdl.handle.net/2451/26420 |
| Appears in Collections: | Finance Working Papers
Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
