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Liquidity risk

About: Liquidity risk is a research topic. Over the lifetime, 8205 publications have been published within this topic receiving 216668 citations.


Papers
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Journal ArticleDOI
TL;DR: The authors survey 1,050 chief financial officers (CFOs) in the U.S., Europe, and Asia to assess whether their firms are credit constrained during the global financial crisis of 2008 and find that constrained firms planned deeper cuts in tech spending, employment, and capital spending.

1,351 citations

Journal ArticleDOI
TL;DR: In this paper, a bank with a fragile capital structure, subject to runs, is identified as a potential source of illiquidity in a bank relationship lender, where the relationship lender may demand to liquidate early or require a return premium when she lends directly.
Abstract: Loans are illiquid when a lender needs relationship‐specific skills to collect them. Consequently, if the relationship lender needs funds before the loan matures, she may demand to liquidate early, or require a return premium, when she lends directly. Borrowers also risk losing funding. The costs of illiquidity are avoided if the relationship lender is a bank with a fragile capital structure, subject to runs. Fragility commits banks to creating liquidity, enabling depositors to withdraw when needed, while buffering borrowers from depositors' liquidity needs. Stabilization policies, such as capital requirements, narrow banking, and suspension of convertibility, may reduce liquidity creation.

1,331 citations

Journal ArticleDOI
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

Journal ArticleDOI
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

Book ChapterDOI
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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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
2023101
2022274
2021247
2020272
2019338
2018308