Liquidity Risk After 20 Years

Lubos Pastor and Robert Stambaugh

No 25774, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The Critical Finance Review commissioned Li, Novy-Marx, and Velikov (2017) and Pontiff and Singla (2019) to replicate the results in Pástor and Stambaugh (2003). Both studies successfully replicate our market-wide liquidity measure and find similar estimates of the liquidity risk premium. In the sample period after our study, the liquidity risk premium estimates are even larger, and the liquidity measure displays sharp drops during the 2008 financial crisis. We respond to both replication studies and offer some related thoughts, such as when to use our traded versus non-traded liquidity factors and how to improve the precision of liquidity beta estimates.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2019-04
Note: AP CF
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Citations: View citations in EconPapers (10)

Published as Lubos Pastor & Robert F. Stambaugh, 2019. "Liquidity Risk After 20 Years," Critical Finance Review, vol 8(1-2), pages 277-299.

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Journal Article: Liquidity Risk After 20 Years (2019)
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