Revisiting Liquidity Risk
This study examines the Pastor-Stambaugh liquidity-augmented four-factor model to revisit whether the marketwide liquidity is indeed a state variable important for asset pricing in the U.S. equity market over the period 1/1966-12/1999. The study applies the Lewellen et al. (2010) two-pass cross-sectional regression methodology and the Kan et al. (2013) pair-wise cross-sectional R-squared test, and finds the liquidity factor is not priced and the model does not outperform the Fama-French three-factor model. The results are robust using post-sample and full-sample periods ending in December 2021. Unlike Pastor-Stambaugh conclusion, the marketwide liquidity is not a state variable important for asset pricing
Year of publication: |
2022
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Authors: | Momani, Mohammad Q.M |
Publisher: |
[S.l.] : SSRN |
Subject: | Theorie | Theory | Liquidität | Liquidity | Bankenliquidität | Bank liquidity | Risiko | Risk | Risikomaß | Risk measure | Marktliquidität | Market liquidity | Betriebliche Liquidität | Corporate liquidity | Risikomanagement | Risk management | Portfolio-Management | Portfolio selection |
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