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Illiquidity and Stock Returns: Cross-Section and Time-Series Effects: A Replication

Larry Harris and Andrea Amato

Critical Finance Review, 2019, vol. 8, issue 1-2, 173-202

Abstract: This paper replicates and extends the Amihud (2002) study that links liquidity to asset pricing. Using the current version of the CRSP dataset, we obtain essentially the same results that Amihud presents. The same methods applied to more recent data show a much weaker relation between liquidity and asset pricing. Finally, we compare the explanatory power of Amihud’s illiquidity measure to that of other simple measures that use the same data for their calculation. We find that the Amihud illiquidity measure is no better than substantially simpler measures.

Keywords: Liquidity; Asset Pricing; Replication Studies; Price-Volume Relations; Transaction Costs (search for similar items in EconPapers)
JEL-codes: G12 G11 G14 G10 (search for similar items in EconPapers)
Date: 2019
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