Stock returns and the volatility of liquidity

Detalhes bibliográficos
Autor(a) principal: Pereira, J.
Data de Publicação: 2010
Outros Autores: Zhang, H.
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: https://ciencia.iscte-iul.pt/public/pub/id/10633
http://hdl.handle.net/10071/6739
Resumo: This paper offers a rational explanation for the puzzling empirical fact that stock returns decrease with an increase in the volatility of liquidity. We model liquidity as a stochastic price impact process and define the liquidity premium as the additional return necessary to compensate a multiperiod investor for the adverse price impact of trading. The model demonstrates that a fully rational, utility maximizing, risk-averse investor can take advantage of time-varying liquidity by adapting his trades to the state of liquidity. We provide new empirical evidence supportive of the model.
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spelling Stock returns and the volatility of liquidityThis paper offers a rational explanation for the puzzling empirical fact that stock returns decrease with an increase in the volatility of liquidity. We model liquidity as a stochastic price impact process and define the liquidity premium as the additional return necessary to compensate a multiperiod investor for the adverse price impact of trading. The model demonstrates that a fully rational, utility maximizing, risk-averse investor can take advantage of time-varying liquidity by adapting his trades to the state of liquidity. We provide new empirical evidence supportive of the model.Cambridge University Press2014-03-25T16:41:53Z2010-01-01T00:00:00Z20102014-03-25T16:36:50Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://ciencia.iscte-iul.pt/public/pub/id/10633http://hdl.handle.net/10071/6739eng0022-1090Pereira, J.Zhang, H.info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:28:48Zoai:repositorio.iscte-iul.pt:10071/6739Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:12:55.262558Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Stock returns and the volatility of liquidity
title Stock returns and the volatility of liquidity
spellingShingle Stock returns and the volatility of liquidity
Pereira, J.
title_short Stock returns and the volatility of liquidity
title_full Stock returns and the volatility of liquidity
title_fullStr Stock returns and the volatility of liquidity
title_full_unstemmed Stock returns and the volatility of liquidity
title_sort Stock returns and the volatility of liquidity
author Pereira, J.
author_facet Pereira, J.
Zhang, H.
author_role author
author2 Zhang, H.
author2_role author
dc.contributor.author.fl_str_mv Pereira, J.
Zhang, H.
description This paper offers a rational explanation for the puzzling empirical fact that stock returns decrease with an increase in the volatility of liquidity. We model liquidity as a stochastic price impact process and define the liquidity premium as the additional return necessary to compensate a multiperiod investor for the adverse price impact of trading. The model demonstrates that a fully rational, utility maximizing, risk-averse investor can take advantage of time-varying liquidity by adapting his trades to the state of liquidity. We provide new empirical evidence supportive of the model.
publishDate 2010
dc.date.none.fl_str_mv 2010-01-01T00:00:00Z
2010
2014-03-25T16:41:53Z
2014-03-25T16:36:50Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv https://ciencia.iscte-iul.pt/public/pub/id/10633
http://hdl.handle.net/10071/6739
url https://ciencia.iscte-iul.pt/public/pub/id/10633
http://hdl.handle.net/10071/6739
dc.language.iso.fl_str_mv eng
language eng
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eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Cambridge University Press
publisher.none.fl_str_mv Cambridge University Press
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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