EconPapers    
Economics at your fingertips  
 

LIQUIDITY AS AN ASSET PRICING FACTOR IN THE UK

Panagiotis Artikis ()

Journal of Financial Management, Markets and Institutions (JFMMI), 2018, vol. 06, issue 02, 1-24

Abstract: This study examines whether there is a strong relationship between stock liquidity, which proxies for the implicit cost of trading shares, and future stock returns in an asset-pricing context in the UK stock market. The time period, 1994–2016, includes the most recent global financial crisis that drained liquidity from financial markets worldwide. Four different measures of stock liquidity are employed; the empirical findings indicate that liquidity is a systematic pricing factor and explains a significant portion of the variation in stock returns, even after the inclusion of the other traditional risk factors. The results are robust to both forms of liquidity, either as a residual effect or in its original form as a separate risk factor. Finally, for the first time quantile regression is applied, showing that the liquidity risk factor (LIQ) absorbs a significant portion of the information content of the size and value factors, while remaining independent of the momentum factor.

Keywords: Liquidity measures; liquidity risk; UK stock exchange; asset pricing; factor model; quantile regression (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2282717X18500081
Open Access

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: https://EconPapers.repec.org/RePEc:wsi:jfmmix:v:06:y:2018:i:02:n:s2282717x18500081

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2282717X18500081

Access Statistics for this article

Journal of Financial Management, Markets and Institutions (JFMMI) is currently edited by Santiago Carbo-Valverde

More articles in Journal of Financial Management, Markets and Institutions (JFMMI) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

 
Page updated 2022-06-02
Handle: RePEc:wsi:jfmmix:v:06:y:2018:i:02:n:s2282717x18500081