Asset Pricing and the Illiquidity Premium

Chan, Howard; Faff, Robert W.

doi:10.1111/j.1540-6288.2005.00118.x

Cited by 129 publications

(108 citation statements)

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“…The evidence for liquidity effect in international market was confirmed by Amihud et al [1997], Hu [1997], Chan and Fa [2005]. The issue of liquidity factor in the Polish market was examined by Lischewski and Voronkowa [2012] and Waszczuk [2013].…”

Section: Liquidity Factormentioning

confidence: 49%

The Relations Between Momentum, Value Size, And Liquidity Factors And Stock Returns On The Polish Market

Zaremba¹,

Konieczka²

2014

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SummaryThe paper examines the relations between selected company characteristics and common stock returns. In the paper, we concentrate on four well-recognized fundamental factors determining stock returns: momentum, value, size and liquidity. First, we review the existing literature in the field. Second, we investigate the relationship between fundamental factors and stock returns on the Polish market. Our computations are based on all companies on the Warsaw Stock Exchange listed in the period 2000-12. Our research provides fresh out-of-sample evidence for momentum, value, size and liquidity premium from the Polish market.

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Section: Liquidity Factormentioning

confidence: 49%

The Relations Between Momentum, Value Size, And Liquidity Factors And Stock Returns On The Polish Market

Zaremba¹,

Konieczka²

2014

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“…Their results document that three-factor models outperform CAPM, and predicting returns on stocks traded on the Malaysian stock exchange can be slightly improved by incorporating illiquidity risk in a three-factor model. Chan and Faff (2003) examined the role of liquidity in asset pricing in the context of the Fama and French cross-sectional framework in an Australian setting. Hearn et al (2009) examined the role of company size and illiquidity in asset pricing in the context of the Fama and French cross-sectional framework in emerging African financial markets .…”

Section: Introductionmentioning

confidence: 99%

CAPM augmented with liquidity and size premium in the Croatian stock market

Minović¹,

Živković²

2014

Economic Research-Ekonomska Istraživanja

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This article examines the following models: Capital Asset Pricing Model (CAPM) (Sharpe, 1964), and Liquidity CAPM (Hearn, Piesse and Strange, 2009) in the Croatian stock market. We used daily data for the period [2005][2006][2007][2008][2009]. The goal of this article is to examine the impact of an overall market factor, factor related to the firm size, and factor of liquidity risk on expected asset returns in the Croatian stock market. We found that Liquidity Capital Asset Pricing Model (LCAPM) model performs better in explaining stock returns than the standard CAPM. Additionally, LCAPM may indeed be a good tool for realistic assessment of the expected asset returns. The combination of company size and illiquidity in asset pricing in the context of the Fama and French cross-sectional framework can improve the description of equilibrium in the Croatian stock market.

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“…For example, Carhart (1997) [4] introduced a Carhart 4-factor (C) model by augumenting the Fama-French 3-factor (FF3) model with momentum factor which can explain the short-term persistence in expected returns. Chan and Faff (2005) [5] advocated a liquidity-agumented FF3 model by using Australian data and find the liquidity factor is very robust to sensitivity checks. Connor, Hagmann and Linton (2012) [12] found that the profitability factor significantly improves the description of average return, and investment pattern in average returns is weak in China stock market.…”

Section: Introductionmentioning

confidence: 99%