Is liquidity the missing link?
AbstractDurand "et al." (2006a) argue that the Australian market is both internationally integrated and domestically segmented. They find that the US-based three-factor model captures returns of the largest stocks in Australia (evidence of international integration), but that it is unable to account for the returns of the smallest stocks (evidence of domestic segmentation). This study resolves the puzzle left by Durand "et al". (2006a). Incorporating a liquidity factor provides the missing link in their analysis: it results in a model that permits both the international integration of the largest stocks and the model can account for the returns of the smallest stocks. Our analysis highlights the important role of liquidity in Australian asset pricing. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 AFAANZ.
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Bibliographic InfoArticle provided by Accounting and Finance Association of Australia and New Zealand in its journal Accounting & Finance.
Volume (Year): 48 (2008)
Issue (Month): 5 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0810-5391
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- Lam, Keith S.K. & Tam, Lewis H.K., 2011. "Liquidity and asset pricing: Evidence from the Hong Kong stock market," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2217-2230, September.
- Gharghori, Philip & Hamzah, Yusuf & Veeraraghavan, Madhu, 2010. "Migration and its contribution to the size and value premiums: Australian evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(2), pages 177-196, April.
- Lischewski, Judith & Voronkova, Svitlana, 2012. "Size, value and liquidity. Do They Really Matter on an Emerging Stock Market?," Emerging Markets Review, Elsevier, vol. 13(1), pages 8-25.
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