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Liquidity Risk and Expected Stock Returns / Lubos Pastor, Robert F. Stambaugh.
- Format:
- Book
- Author/Creator:
- Pastor, Lubos.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w8462.
- NBER working paper series no. w8462
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2001.
- Summary:
- This study investigates whether market-wide liquidity is a state variable important for asset pricing. We find that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. Our monthly liquidity measure, an average of individual-stock measures estimated with daily data, relies on the principle that order flow induces greater return reversals when liquidity is lower. Over a 34-year period, the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities by 7.5% annually, adjusted for exposures to the market return as well as size, value, and momentum factors.
- Notes:
- Print version record
- September 2001.
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