Capital gains, illiquidity, and stock returns

Xiaoyan Lei, Yuegang Zhou and Xiaoneng Zhu

Pacific-Basin Finance Journal, 2013, vol. 25, issue C, 273-293

Abstract: This paper investigates the tripartite association among capital gains, illiquidity, and stock market returns. We find that trading in capital gains improves stock liquidity. We also find that realized stock returns are negatively related to the joint term of illiquidity and capital gains, but positively correlated with capital gains. These results are largely robust when we distinguish stock liquidity from unexpected liquidity. Our findings are consistent with the disposition effect and have important implications for asset pricing models and for investing.

Keywords: Illiquidity; The disposition effect; Capital gains; Stock return (search for similar items in EconPapers)
JEL-codes: G02 G10 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:25:y:2013:i:c:p:273-293

DOI: 10.1016/j.pacfin.2013.10.001

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