TY - JOUR
T1 - The Diminishing Liquidity Premium
AU - Ben-Rephael, Azi
AU - Kadan, Ohad
AU - Wohl, Avi
N1 - Publisher Copyright:
Copyright © Michael G. Foster School of Business 2015.
PY - 2015/7/14
Y1 - 2015/7/14
N2 - Stock liquidity has improved over the recent 4 decades. This improvement was accompanied by a dramatic increase in trading activity. The net effect on the liquidity premium is ambiguous. We show that the characteristic liquidity premium of U.S. stocks has significantly declined over the past 4 decades. In recent years, characteristic liquidity is significantly priced only for the smallest common stocks. This decline stems from an improvement in liquidity and from a lower sensitivity of expected returns to liquidity. By contrast, systematic liquidity has not been trending down and is still significantly priced primarily among NASDAQ stocks.
AB - Stock liquidity has improved over the recent 4 decades. This improvement was accompanied by a dramatic increase in trading activity. The net effect on the liquidity premium is ambiguous. We show that the characteristic liquidity premium of U.S. stocks has significantly declined over the past 4 decades. In recent years, characteristic liquidity is significantly priced only for the smallest common stocks. This decline stems from an improvement in liquidity and from a lower sensitivity of expected returns to liquidity. By contrast, systematic liquidity has not been trending down and is still significantly priced primarily among NASDAQ stocks.
UR - http://www.scopus.com/inward/record.url?scp=84983140580&partnerID=8YFLogxK
U2 - 10.1017/S0022109015000071
DO - 10.1017/S0022109015000071
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AN - SCOPUS:84983140580
SN - 0022-1090
VL - 50
SP - 197
EP - 229
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 1-2
ER -