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Pricing, dynamics, and determinants of illiquidity risks: International evidence

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  • Saad, Mohsen
  • Samet, Anis

Abstract

We estimate conditional LCAPM illiquidity risks for common stocks in emerging and developed markets. We find that illiquidity risks are determined by local factors for both markets and are more strongly priced in emerging markets. Illiquidity risks exhibit no time trend and experienced an increase during the recent financial crisis that is not completely reversed a year after. Finally, we explore the determinants of illiquidity risks and find that business cycle determinants have similar explanatory ability in both sets of markets, while the effect of monetary policy and liquidity funding is more strongly supported in developed and emerging markets, respectively.

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  • Saad, Mohsen & Samet, Anis, 2015. "Pricing, dynamics, and determinants of illiquidity risks: International evidence," Emerging Markets Review, Elsevier, vol. 23(C), pages 124-147.
    • Handle: RePEc:eee:ememar:v:23:y:2015:i:c:p:124-147
    DOI: 10.1016/j.ememar.2014.11.005
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    4. Wang, Chuan & Murgulov, Zoltan & Haman, Janto, 2015. "Impact of changes in the CSI 300 Index constituents," Emerging Markets Review, Elsevier, vol. 24(C), pages 13-33.

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    More about this item

    Keywords

    Asset pricing; Conditional LCAPM; Liquidity risk; Illiquidity risk premium; Dynamic conditional correlation; Multivariate GARCH;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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