Author
Yakov Amihud
Other affiliations: Tel Aviv University, University of Michigan, Courant Institute of Mathematical Sciences ...read more
Bio: Yakov Amihud is an academic researcher from New York University. The author has contributed to research in topics: Market liquidity & Liquidity risk. The author has an hindex of 55, co-authored 140 publications receiving 30426 citations. Previous affiliations of Yakov Amihud include Tel Aviv University & University of Michigan.
Papers published on a yearly basis
Papers
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TL;DR: In this article, the authors show that expected market illiquidity positively affects ex ante stock excess return, suggesting that expected stock ex ante excess return partly represents an illiquid price premium, which complements the cross-sectional positive return-illiquidity relationship.
5,636 citations
TL;DR: In this paper, the effects of stock illiquidity on stock return have been investigated and it was shown that expected market illiquidities positively affects ex ante stock excess return (usually called risk premium) over time.
Abstract: New tests are presented on the effects of stock illiquidity on stock return. Over time, expected market illiquidity positively affects ex ante stock excess return (usually called â¬Srisk premiumâ¬?). This complements the positive cross-sectional return-illiquidity relationship. The illiquidity measure here is the average daily ratio of absolute stock return to dollar volume, which is easily obtained from daily stock data for long time series in most stock markets. Illiquidity affects more strongly small firms stocks, suggesting an explanation for the changes â¬Ssmall firm effectâ¬? over time. The impact of market illiquidity on stock excess return suggests the existence of illiquidity premium and helps explain the equity premium puzzle.
5,333 citations
TL;DR: In this article, the effect of the bid-ask spread on asset pricing was studied and it was shown that market-observed expexted return is an increasing and concave function of the spread.
4,129 citations
TL;DR: In this article, a manager's motivation for a conglomerate merger is investigated. And the authors show that managers engage in conglomerate mergers to decrease their largely undiversifiable "employment risk" (i.e., risk of losing job, professional reputation, etc.).
Abstract: A conglomerate merger generally leads, through the diversification effect, to reduced risk for the combined entity. As is well known, in perfect capital markets such risk reduction will not be beneficial to stockholders, since they can achieve on their own the preferred degree of risk in their "homemade" portfolios. What, then, is the motive for the widespread and persisting phenomenon of conglomerate mergers? In this study a "managerial" motive for conglomerate merger is advanced and tested. Specifically, managers, as opposed to investors, are hypothesized to engage in conglomerate mergers to decrease their largely undiversifiable "employment risk" (i.e., risk of losing job, professional reputation, etc.). Such risk-reduction activities are considered here as managerial perquisites in the context of the agency cost model. This hypothesis about conglomerate merger motivation is empirically examined in two different tests and found to be consistent with the data.
2,876 citations
01 Jan 2012
TL;DR: In this paper, a simple equilibrium model with liquidity risk is proposed, where a security's required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return.
Abstract: This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidityadjusted capital asset pricing model, a security s required return depends on its expected liquidity as well as on the covariances of its own return and liquidity with the market return and liquidity. In addition, a persistent negative shock to a security s liquidity results in low contemporaneous returns and high predicted future returns. The model provides a unified framework for understanding the various channels through which liquidity risk may affect asset prices. Our empirical results shed light on the total and relative economic significance of these channels and provide evidence of flight to liquidity. r 2005 Elsevier B.V. All rights reserved.
1,156 citations
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TL;DR: In this article, the authors review agency theory, its contributions to organization theory, and the extant empirical work and develop testable propositions and conclude that agency theory offers unique insight into information systems, outcome uncertainty, incentives, and risk.
Abstract: Agency theory is an important, yet controversial, theory. This paper reviews agency theory, its contributions to organization theory, and the extant empirical work and develops testable propositions. The conclusions are that agency theory (a) offers unique insight into information systems, outcome uncertainty, incentives, and risk and (b) is an empirically valid perspective, particularly when coupled with complementary perspectives. The principal recommendation is to incorporate an agency perspective in studies of the many problems having a cooperative structure.
11,338 citations
TL;DR: The authors argued that the preponderance of theoretical reasoning and empirical evidence suggests a positive first-order relationship between financial development and economic growth, and that financial development level is a good predictor of future rates of economic growth.
Abstract: The author argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth. There is evidence that the financial development level is a good predictor of future rates of economic growth, capital accumulation, and technological change. Moreover, cross-country, case-style, industry level and firm-level analysis document extensive periods when financial development crucially affects the speed and pattern of economic development. The author explains what the financial system does and how it affects, and is affected by, economic growth. Theory suggests that financial instruments, markets and institutions arise to mitigate the effects of information and transaction costs. A growing literature shows that differences in how well financial systems reduce information and transaction costs influence savings rates, investment decisions, technological innovation, and long-run growth rates. A less developed theoretical literature shows how changes in economic activity can influence financial systems. The author advocates a functional approach to understanding the role of financial systems in economic growth. This approach focuses on the ties between growth and the quality of the functions provided by the financial systems. The author discourages a narrow focus on one financial instrument, or a particular institution. Instead, the author addresses the more comprehensive question: What is the relationship between financial structure and the functioning of the financial system?
5,967 citations
TL;DR: The presence of traders with superior information leads to a positive bid-ask spread even when the specialist is risk-neutral and makes zero expected profits as discussed by the authors, and the expectation of the average spread squared times volume is bounded by a number that is independent of insider activity.
5,902 citations
TL;DR: The model financial economics encompasses finance, micro-investment theory and much of the economics of uncertainty as mentioned in this paper, and it has had a direct and significant influence on practice, as is evident from its influence on other branches of economics including public finance, industrial organization and monetary theory.
Abstract: THE SPHERE of model financial economics encompasses finance, micro investment theory and much of the economics of uncertainty. As is evident from its influence on other branches of economics including public finance, industrial organization and monetary theory, the boundaries of this sphere are both permeable and flexible. The complex interactions of time and uncertainty guarantee intellectual challenge and intrinsic excitement to the study of financial economics. Indeed, the mathematics of the subject contain some of the most interesting applications of probability and optimization theory. But for all its mathematical refinement, the research has nevertheless had a direct and significant influence on practice. ’ It was not always thus. Thirty years ago, finance theory was little more than a collection of anecdotes, rules of thumb, and manipulations of accounting data with an almost exclusive focus on corporate financial management. There is no need in this meeting of the guild to recount the subsequent evolution from this conceptual potpourri to a rigorous economic theory subjected to systematic empirical examination? Nor is there a need on this occasion to document the wide-ranging impact of the research on finance practice.2 I simply note that the conjoining of intrinsic intellectual interest with extrinsic application is a prevailing theme of research in financial economics. The later stages of this successful evolution have however been marked by a substantial accumulation of empirical anomalies; discoveries of theoretical inconsistencies; and a well-founded concern about the statistical power of many of the test methodologies.3 Finance thus finds itself today in the seemingly-paradoxical position of having more questions and empirical puzzles than at the start of its
5,672 citations