This paper studies whether illiquidity affects the predictability of fundamental valuation variables. Firm-level, cross-sectional analyses show that returns of illiquid stocks contain less information about their firm's future earnings growth compared to those of more liquid stocks. A natural...

Recent research shows that the implied cost of capital (ICC), measured from analyst forecasts and current stock prices, positively predicts returns at the aggregate level. In contrast, there is a strong negative relation between ICC and future returns in the cross-section. We hypothesize that...

This study demonstrates that the cross-sectional variation of systematic risk and systematic liquidity has increased from 1963 to 2008. Both have increased significantly for large-capitalization companies but have declined significantly for small-cap companies. These findings have several...