Márquez, Elena; Nieto, Belén; Rubio, Gonzalo - In: International Review of Economics & Finance 29 (2014) C, pp. 57-74
This paper derives closed-form expressions for consumption-based stochastic discount factors adjusted by market-wide illiquidity shocks, considering both contemporaneous and ultimate consumption risk. We find that market-wide illiquidity risk is important for pricing risky assets under...