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The Importance Of Liquidity As A Factor In Asset Pricing

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  • Marvin A. Keene
  • David R. Peterson

Abstract

We employ the Fama-French time-series regression approach to examine liquidity as a risk factor affecting stock returns. Prior studies establish liquidity as an important consideration in investment decisions. Here, liquidity is found to be an important factor affecting portfolio returns, even after the effects of market, size, book-to-market equity, and momentum are considered. Nonzero intercepts remain, however, indicating continued missing risk factors. 2007 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Marvin A. Keene & David R. Peterson, 2007. "The Importance Of Liquidity As A Factor In Asset Pricing," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 30(1), pages 91-109.
  • Handle: RePEc:bla:jfnres:v:30:y:2007:i:1:p:91-109
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    Citations

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    Cited by:

    1. Dey, Malay K. & Wang, Chaoyan, 2012. "Return spread and liquidity: Evidence from Hong Kong ADRs," Research in International Business and Finance, Elsevier, vol. 26(2), pages 164-180.
    2. repec:eee:finmar:v:33:y:2017:i:c:p:22-41 is not listed on IDEAS
    3. 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.
    4. repec:ehu:cuader:15779 is not listed on IDEAS
    5. Mamatzakis, E & Babalos, Vassilios & filipas, n, 2013. "Fund Performance Evaluation in Greece Revisited: Evidence from the Impact of Operational Attributes," MPRA Paper 51640, University Library of Munich, Germany.
    6. repec:bbz:fcpbbr:v:11:y:2014:i:1:p:69-89 is not listed on IDEAS
    7. repec:bbz:fcpbbr:v:9:y:2012:i:4:p:27-50 is not listed on IDEAS
    8. Frestad, Dennis, 2012. "Liquidity and dirty hedging in the Nordic electricity market," Energy Economics, Elsevier, vol. 34(5), pages 1341-1355.
    9. repec:eee:riibaf:v:41:y:2017:i:c:p:172-184 is not listed on IDEAS
    10. Malay K. Dey & Chaoyan Wang, 2008. "Return Spread and Liquidity on Chinese ADRs," NFI Working Papers 2008-WP-09, Indiana State University, Scott College of Business, Networks Financial Institute.
    11. Greg Filbeck & Xin Zhao & Ryan Knoll, 2017. "An analysis of working capital efficiency and shareholder return," Review of Quantitative Finance and Accounting, Springer, vol. 48(1), pages 265-288, January.
    12. Joseph J. French & Rodrigo Taborda, 2017. "Disentangling the relationship between liquidity and returns in Latin America," DOCUMENTOS CEDE 015606, UNIVERSIDAD DE LOS ANDES-CEDE.

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