Trade-Time Measures of Liquidity

• 成果类型: Article
• 署名作者: Barardehi, Yashar H.; Bernhardt, Dan; Davies, Ryan J.
• 署名单位: Chapman University System; Chapman University; University System of Ohio; Ohio State University; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of Warwick; Boston College
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy012
• 发表日期: 2019
• 页码: 126
• 关键词: Market microstructure; cross-section; prices; illiquidity; SIXTEENTHS; inference; returns; MODEL; RISK

摘要

Dramatic microstructure changes in equity markets have made standard liquidity measures less accurate proxies for trading costs. We develop trade-time liquidity measures that reflect per-dollar price impacts of fixed-dollar volumes. Our measures better capture institutional trading costs and better explain the cross-section of returns than do standard measures, especially in recent years. Despite improvements in measures of market quality, expected trading costs have explanatory power for the cross-section of expected returns: we obtain monthly liquidity premium estimates of 5.3 bp for expected returns and 2.4 bp for risk-adjusted returns. Estimated premiums rise after the financial crisis and remain high thereafter. Received April 15, 2016; editorial decision December 24, 2017 by Editor Andrew Karolyi.