Liquidity and asset pricing: Evidence on the role of investor holding period

Randi Næs and Bernt Ødegaard

No 2007/11, Working Paper from Norges Bank

Abstract: We use data on actual holding periods for all investors in a stock market over a 10 year period to investigate the links between holding periods, liquidity, and asset returns. Microstructure measures of liquidity are shown to be important determinants of the holding period decision of individual investors. We also find evidence that the average holding period is different for different investor groups. Interestingly, we find that turnover is an imperfect proxy for holding period. Moreover, while both turnover and spread are related to stock returns, holding period is not. Our results suggest that the link between liquidity and asset prices found in numerous empirical studies cannot be explained by models such as Amihud and Mendelson (1986) where investors merely want to be compensated for exogenous trading costs.

Keywords: Market microstructure; Liquidity; Holding period (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-01-11
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.norges-bank.no/en/news-events/news-pub ... pers/2007/WP-200711/

Related works:
Working Paper: Liquidity and Asset Pricing: Evidence on the Role of Investor Holding Period (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2007_11

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().