We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

The distribution of institutional investor risk-taking carries significant explanatory power for the cross-section of asset returns. We compute an investor-level Value-at-Risk (VaR) measure - our proxy for ex-ante riskiness - from a structural model with stochastic volatility that we estimate...