A comparison among various dimensions of illiquidity effect: A case study of Finland

Hilal Anwar Butt

Research in International Business and Finance, 2015, vol. 33, issue C, 204-220

Abstract: We study different dimensions of the illiquidity effect on asset returns in the Finnish market. The market illiquidity is measured as unexpected rises and falls in average monthly zero returns across all stocks. We find that for the returns on the specific class of assets, a flight to the liquidity effect is the most important systematic risk among all dimensions of the illiquidity effect. In other words, higher returns for illiquid assets in good times compensate for a pronounced drop in those returns in bad times and vice versa. Furthermore, only one illiquidity-related factor has a similar pricing capacity as Fama and French's (1993) three-factor model and Carhart's (1997) four-factor model in the context of this study.

Keywords: Illiquidity effect; Flight to liquidity (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:33:y:2015:i:c:p:204-220

DOI: 10.1016/j.ribaf.2014.09.002

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