Asset pricing with liquidity risk
Viral V. Acharya,Viral V. Acharya,Lasse Heje Pedersen,Lasse Heje Pedersen,Lasse Heje Pedersen +4 more
TLDR
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.About:
This article is published in Journal of Financial Economics.The article was published on 2005-08-01 and is currently open access. It has received 2020 citations till now. The article focuses on the topics: Liquidity risk & Market liquidity.read more
Citations
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Illiquidity and stock returns: cross-section and time-series effects $
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.
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Market Liquidity and Funding Liquidity
TL;DR: In this article, the authors provide a model that links a security's market liquidity and traders' funding liquidity, i.e., their availability of funds, to explain the empirically documented features that market liquidity can suddenly dry up (i) is fragile), (ii) has commonality across securities, (iii) is related to volatility, and (iv) experiences “flight to liquidity” events.
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Liquidity and Leverage
Tobias Adrian,Hyun Song Shin +1 more
TL;DR: In a financial system in which balance sheets are continuously marked to market, asset price changes appear immediately as changes in net worth, eliciting responses from financial intermediaries who adjust the size of their balance sheets as mentioned in this paper.
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Size, Value, and Momentum in International Stock Returns §
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, empirical asset pricing models capture the value and momentum patterns in international average returns and whether asset pricing seems to be integrated across the four regions (North America, Europe, Japan, and Asia Pacific).
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Presidential Address: Discount Rates
TL;DR: Discount-rate variation is the central organizing question of current asset-pricing research as discussed by the authors, and a survey of discount-rate theories and applications can be found in the survey.
References
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Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
ReportDOI
A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix
Whitney K. Newey,Kenneth D. West +1 more
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
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Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
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The Cross‐Section of Expected Stock Returns
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this paper, Bhandari et al. found that the relationship between market/3 and average return is flat, even when 3 is the only explanatory variable, and when the tests allow for variation in 3 that is unrelated to size.
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Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.