world. We show that even in this market exposure to liquidity risk commands a non-trivial risk premium of up to 3.6% per … annum. In particular, systematic and currency-specific liquidity risk are not subsumed by existing risk factors and … successfully price the cross-section of currency returns. However, we also find that liquidity and carry trade premia are …

We introduce the Budapest Liquidity Measure (BLM) and one of its possible applications in the field of risk management … the liquidity risk arising from the buying and selling of a position. With the use of BLM we show, how to integrate … liquidity risk into the VaR-framework. While our method has already been introduced, it has never been tested on the Hungarian …

Liquidity commonality is defined as liquidity co-movements across assets or markets. In the current literature, it is … measured relative to a single factor, i.e., the average liquidity across assets or markets. However, liquidity co-movements may … liquidity co-movements. Using Asian stock markets as an example, this paper shows that cross-market liquidity commonality is …

A unified explanation of risk and mispricing in stock returns underpinned by their aggregate liquidity risk is … presented. We argue alternating liquidity exposures depict two distinct investment preferences-hedging against aggregate … liquidity risk or betting on it. A three-factor model capturing these return variations is developed. Results show that our …

Based on the theory of static replication of variance swaps we assess the sign and magnitude of variance risk premiums …

We document that the variation in market liquidity is an important determinant of momentum crashes that is independent … sensitivity of short-leg of momentum portfolio to changes in market liquidity that flares the tail risk of momentum strategy in … such that the contemporaneous increase in market liquidity predominantly sums up the trademark negative relationship …

diversification benefits for international investors. However, many stocks in these markets are thinly traded so liquidity is an … important consideration. We investigate which liquidity proxies best measure the actual cost of trading in 19 frontier markets … with liquidity benchmarks, while the FHT measure provides the best measure of the magnitude of actual transaction costs …

We study the effects of FX liquidity risk on carry trade returns using a low-frequency market-wide liquidity measure …. We show that a liquidity-based ranking of currency pairs can be used to construct a mimicking liquidity risk factor …, which helps in explaining the variation of carry trade returns across exchange rate regimes. In a liquidity-adjusted asset …