We develop the principal component analysis (PCA) approach to systematic liquidity measurement by introducing moving and expanding estimation windows. We evaluatethese methods along with traditional estimation techniques (full sample PCA and market average) in terms of ability to explain (1)...

This paper investigates whether investors are compensated for taking on commonality risk in equity portfolios. A large literature documents the existence and the causes of commonality in illiquidity, but the implications for investors are less understood. We find a return premium for commonality...

This paper estimates a conditional version of the liquidity adjusted CAPM by Acharya and Pedersen (2005) using NYSE and AMEX data from 1927 to 2010 to study the illiquidity premium and its variation over time. The components of the illiquidity premium is in this model derived as the level of...

Using non-parametric weak separability tests that are extended to allow for measurement errors in the data, a broad group of UK monetary assets is found to be weakly separable from consumer goods and leisure over the larger part of the nineties. Financial innovations have made assets with...

This paper analyzes rigidities in the behavior of mark-up on petroleum products in the New York area using a new set of high-frequency data. We use a methodology that accounts both for deterministic and stochastic nature of petrol prices. The results indicate that the adjustment to the long run...