Does commonality in illiquidity matter to investors?

Arbeitspapier

This paper investigates whether investors are compensated for taking on commonality risk in equity portfolios. A large literature documents the existence and the causes of commonality in illiquidity, but the implications for investors are less well understood. In a more than fifty year long sample of NYSE stocks, we find that commonality risk carries a return premium of around 2.6 per cent annually. The commonality risk premium is statistically and economically significant, and substantially higher than what is found in previous studies. It is robust when controlling for illiquidity level effects, different investment horizons, as well as variations in illiquidity measurement and systematic illiquidity estimation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Birmingham Business School Discussion Paper Series ; No. 2015-02

Classification and Topics

• Classification: Wirtschaft

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Anderson, Richard G. ; Binner, Jane M. ; Hagströmer, Björn ; Nilsson, Birger
• Event: Veröffentlichung
• (who): University of Birmingham, Birmingham Business School
• (where): Birmingham
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/202663
• Last update: 10.03.2025, 11:42 AM CET