The Time Variation of Liquidity Risk on US Stock Markets

Artikel

The influence of liquidity costs and liquidity risk on asset returns has been proven by several empirical studies. This paper analyzes the conditional version of the liquidity-adjusted capital asset pricing model and shows that betas significantly vary over different economic regimes and that liquid portfolios provide diversification benefits compared with illiquid portfolios. The results support the effects of a flight-to-liquidity. The time variation of liquidity betas induces additional risk for investors, which has important implications for investment decisions and asset allocation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Credit and Capital Markets – Kredit und Kapital ; ISSN: 2199-1235 ; Volume: 51 ; Year: 2018 ; Issue: 2 ; Pages: 205-225

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions
• Subject: CAPM ; liquidity risk ; regime switching model ; time variation ; liquidity betas

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ludwig, Michael
• Event: Veröffentlichung
• (who): Duncker & Humblot
• (where): Berlin
• (when): 2018

Further information

• DOI: doi:10.3790/ccm.51.2.205
• Last update: 10.03.2025, 11:44 AM CET