|
Archive@NYU >
Stern School of Business >
Finance Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27289
|
| Title: | Asset Pricing with Liquidity Risk |
| Authors: | Acharya, Viral V.
Pedersenz, Lasse Heje |
| Issue Date: | 17-Jul-2003 |
| Series/Report no.: | FIN-03-044 |
| Abstract: | This paper studies equilibrium asset pricing with liquidity risk | the
risk arising from unpredictable changes in liquidity over time. It is
shown that a security’s required return depends on its expected
illiquidity and on the covariances of its own return and illiquidity
with market return and market illiquidity. This gives rise to a
liquidity- adjusted capital asset pricing model. Further, if a
security’s liquidity is persistent, a shock to its illiquidity
results in low contemporaneous returns and high predicted future
returns. Empirical evidence based on cross-sectional tests is consistent
with liquidity risk being priced. |
| URI: | http://hdl.handle.net/2451/27289 |
| Appears in Collections: | Finance Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
