Illiquidity measures appear to be related to monthly realized returns but do they impact long-run costs of capital (CoC) for firms? Using U.S. data, we find cross-sectional evidence that, controlling for market capitalization, the Amihud (2002) measure of illiquidity is negatively related to CoC...

We estimate an implied value premium (IVP) using the implied cost of capital methodology. The implied value premium is the difference between the implied costs of capital of value stocks and growth stocks and is a direct estimate of the difference in expected returns between value stocks and...