Economics at your fingertips  

Asset liquidity, business risk, and beta

Ali Nejadmalayeri

Global Finance Journal, 2021, vol. 48, issue C

Abstract: Extant literature posits that because of leverage, equity beta estimates from a single factor capital asset pricing model based on an equity-only market index are biased. We show analytically that this leverage bias is intimately related to the firm's asset structure per se, the firm's asset liquidity (i.e., cash holdings) and business risk. This is mainly because riskless cash holdings and risky real assets jointly determine the relevant risk for asset pricing. We empirically confirm that asset liquidity and business risk can marginally explain the leverage bias in the cross-section of stocks returns.

Keywords: Multifactor asset pricing; Asset liquidity; Cash holdings; Business risk (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

DOI: 10.1016/j.gfj.2020.100560

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-06-30
Handle: RePEc:eee:glofin:v:48:y:2021:i:c:s1044028320301319