Topic
Accounting liquidity
About: Accounting liquidity is a research topic. Over the lifetime, 2240 publications have been published within this topic receiving 73997 citations. The topic is also known as: liquidity.
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TL;DR: In this article, the authors investigated whether marketwide liquidity is a state variable important for asset pricing and found that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity.
Abstract: This study investigates whether marketwide liquidity is a state variable important for asset pricing. We find that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. Our monthly liquidity measure, an average of individual-stock measures estimated with daily data, relies on the principle that order flow induces greater return reversals when liquidity is lower. From 1966 through 1999, the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low sensitivities by 7.5 percent annually, adjusted for exposures to the market return as well as size, value, and momentum factors. Furthermore, a liquidity risk factor accounts for half of the profits to a momentum strategy over the same 34-year period.
4,048 citations
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.
2,020 citations
TL;DR: In this article, a wider-angle lens exposes an imposing image of commonality in market microstructure, showing that quoted spreads, quoted depth, and effective spreads co-move with market and industry-wide liquidity.
Abstract: Traditionally and understandably, the microscope of market microstructure has focused on attributes of single assets. Little theoretical attention and virtually no empirical work has been devoted to common determinants of liquidity nor to their empirical manifestation, correlated movements in liquidity. But a wider-angle lens exposes an imposing image of commonality. Quoted spreads, quoted depth, and effective spreads co-move with market- and industry-wide liquidity. After controlling for well-known individual liquidity determinants such as volatility, volume, and price, common influences remain significant and material. Recognizing the existence of commonality is a key to uncovering some suggestive evidence that inventory risks and asymmetric information both affect intertemporal changes in liquidity.
1,410 citations
TL;DR: In this article, the authors compared three measures, effective spread, realized spread, and price impact based on both Trade and Quote (TAQ) and Rule 605 data, and found that the new effective/realized spread measures win the majority of horseraces, while the Amihud [2002.5] measure does well measuring price impact.
1,287 citations
TL;DR: The authors provided an alternative test of Amihud and Mendelson's (1986, Journal of Financial Economics, 8, 31, 31-35) model using the turnover rate (number of shares traded as a fraction of the number of shares outstanding) as a proxy for liquidity.
1,271 citations