allow market liquidity to vary from "normal" periods, when all assets are fully liquid, to "illiquidity crises," when some … assets can only be traded infrequently. The possibility of a liquidity crisis leads to limited arbitrage in normal times …

. We extend the classical optimal execution results by considering stochastic exogenous liquidity effects as well as … liquidity and volatility effects and nonlinear temporary market impact. Moreover, we allow for an additional stochastic … exogenous liquidity effect, used to capture the base illiquidity of a market. We analyze various aspects of our model using a …

liquidity to satisfy these liabilities?”; and “What is my optimal allocation to private assets and the composition of the … private and public portfolios?”.“Liquidity” for investors is their degree of confidence that their portfolios will satisfy … portfolios, are interrelated. In addition, the model shows that increasing a portfolio’s liquidity – i.e., increasing the …

While empirical literature has documented a negative relation between default risk and stock returns, theory suggests …. In accordance with theory, we find that the systematic part, measured as the PD sensitivity to aggregate default risk, is …

Purpose: The aim of this paper is to examine the role of liquidity in asset pricing in a tiny market, such as the … liquidity in asset pricing. Design/methodology/approach: The authors propose and compare two alternative implications of … liquidity in asset pricing: as a desirable characteristic of stocks and as a source of systematic risk. In contrast to prior …

In this paper we survey the theoretical and empirical literatures on market liquidity. We organize both literatures … basic questions within that model. We review the empirical literature through the lens of the theory, using the theory to …

The recent asset pricing evidence on the return-liquidity risk relationship is mixed and somewhat ambiguous. We re …-evaluate the importance of market-wide liquidity and liquidity risk for equity pricing by taking the role of investor sentiment … into account. Regarding the market-wide liquidity level as a systematic factor, we find that high market sentiment tends to …

We investigate the pricing of systematic liquidity risk in UK equities using a large sample of daily data. Employing … four alternative measures of liquidity we first find strong evidence of commonality in liquidity across stocks. We apply … asymptotic principal component analysis (PCA) on the sample of stocks to extract market or systematic liquidity factors. Previous …