Liquidity and Autocorrelations in Individual Stock Returns

@inproceedings{Avramov2006LiquidityAA,
  title={Liquidity and Autocorrelations in Individual Stock Returns},
  author={Doron Avramov and Tarun Chordia and Amit Goyal},
  year={2006}
}
This paper documents a strong relationship between short-run reversals and stock illiquidity, even after controlling for trading volume. The largest reversals and the potential contrarian trading strategy profits occur in high turnover, low liquidity stocks, as the price pressures caused by non-informational demands for immediacy are accommodated. However, the contrarian trading strategy profits are smaller than the likely transactions costs. This lack of profitability and the fact that the… CONTINUE READING

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