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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27420
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| Title: | Illiquidity and Stock Returns: Cross-Section and Time-Series Effects |
| Authors: | Amihud, Yakov |
| Issue Date: | 2000 |
| Series/Report no.: | S-AM-00-10 |
| Abstract: | New tests are presented on the effects of stock illiquidity on stock
return. Over time, expected market illiquidity positively affects ex
ante stock excess return (usually called “risk premium”).
This complements the positive cross-sectional return-illiquidity
relationship. The illiquidity measure here is the average daily ratio of
absolute stock return to dollar volume, which is easily obtained from
daily stock data for long time series in most stock markets. Illiquidity
affects more strongly small firms stocks, suggesting an explanation for
the changes “small firm effect” over time. The impact of
market illiquidity on stock excess return suggests the existence of
illiquidity premium and helps explain the equity premium puzzle. |
| URI: | http://hdl.handle.net/2451/27420 |
| Appears in Collections: | Asset Management
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