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Liquidity and Asset Pricing: Evidence on the Role of Investor Holding Period

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  • Naes, Randi

    (Ministry of Industry)

  • Ødegaard, Bernt Arne

    ()
    (University of Stavanger)

Abstract

We use data on actual holding periods for all investors in a stock market over a 10-year period to investigate the links between holding periods, liquidity, and asset returns. Microstructure measures of liquidity are shown to be important determinants of the holding period decision of individual investors. Average holding periods differ across different investor types. Turnover is an imperfect proxy for holding period. While both turnover and spread are related to stock returns, holding period is not.

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File URL: http://www1.uis.no/ansatt/odegaard/uis_wps_econ_fin/uis_wps_2009_19_naes_odegaard.pdf
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Bibliographic Info

Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2009/19.

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Length: 40 pages
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:hhs:stavef:2009_019

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Postal: University of Stavanger, NO-4036 Stavanger, Norway
Web page: http://www.uis.no/research/economics_and_finance
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Keywords: Market microstructure; Holding period; duration;

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  1. Mila Getmansky & Andrew W. Lo & Igor Makarov, 2003. "An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns," NBER Working Papers 9571, National Bureau of Economic Research, Inc.
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  12. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  13. Huang, Ming, 2003. "Liquidity shocks and equilibrium liquidity premia," Journal of Economic Theory, Elsevier, vol. 109(1), pages 104-129, March.
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