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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/27420

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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