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Illiquidity and Stock Returns: Cross-Section and Time-Series Effects
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 â¬Srisk premiumâ¬?).
Illiquidity and Stock Returns: Cross-Section and Time-Series Effects
This paper shows that over time, expected market illiquidity positively affects ex ante stock excess return, suggesting that expected stock excess return partly represents an illiquidity premium.
Asset pricing and the bid-ask spread
Abstract This paper studies the effect of the bid-ask spread on asset pricing. We analyze a model in which investors with different expected holding periods trade assets with different relative
Risk Reduction as a Managerial Motive for Conglomerate Mergers
A conglomerate merger generally leads, through the diversification effect, to reduced risk for the combined entity. As is well known, in perfect capital markets such risk reduction will not be
Dealership market: Market-making with inventory
Abstract This study considers the problem of a price-setting monopolistic market-maker in a dealership market where the stochastic demand and supply are depicted by price-dependent Poisson processes
Trading Mechanisms and Stock Returns: An Empirical Investigation
This paper examines the effects of the mechanism by which securities are traded on their price behavior. We compare the behavior of open-to-open and close-to-close returns on NYSE stocks, given the
Mutual Fund's R^2 as Predictor of Performance
We propose that fund performance can be predicted by its R-super-2, obtained from a regression of its returns on a multifactor benchmark model. Lower R-super-2 indicates greater selectivity, and it
Liquidity, Maturity, and the Yields on U.S. Treasury Securities
The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are examined for bonds (Treasury notes and bills with matched maturities of less than six months). The
Predictive Regressions: A Reduced-Bias Estimation Method
Standard predictive regressions produce biased coefficient estimates in small samples when the regressors are Gaussian first-order autoregressive with errors that are correlated with the error series
Liquidity and Asset Prices
We review the theories on how liquidity affects the required returns of capital assets and the empirical studies that test these theories. The theory predicts that both the level of liquidity and