We suggest a behavioral perspective for the demand for risky assets (DRA) in which the risk-free rate affects this demand: the lower the risk-free rate the higher the demand for risky assets. This perspective is based on the idea that changes in return exhibit decreasing sensitivity, that is,...

This paper reviews research on the effects of different measures of liquidity on asset prices. The foundation is the pricing of liquidity as an asset characteristic that began with the theoretical model and empirical evidence of Amihud and Mendelson (1986). The positive relation between expected...

This paper presents a liquidity factor IML, the return on illiquid-minus-liquid stock portfolios. The IML, adjusted for the common risk factors, measures the illiquidity premium whose annual alpha is about 4% over the period 1950-2012. I then test whether the systematic risk (β) of IML is...