Liquidity biases in asset pricing tests

• 成果类型: Article
• 署名作者: Asparouhova, Elena; Bessembinder, Hendrik; Kalcheva, Ivalina
• 署名单位: Utah System of Higher Education; University of Utah; University of Arizona
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2009.12.011
• 发表日期: 2010
• 页码: 215-237
• 关键词: MICROSTRUCTURE NOISE; illiquidity; asset pricing; Return premium; bias correction

摘要

Microstructure noise in security prices biases the results of empirical asset pricing specifications, particularly when security-level explanatory variables are cross-sectionally correlated with the amount of noise. We focus on tests of whether measures of illiquidity, which are likely to be correlated with the noise, are priced in the cross-section of stock returns, and show a significant upward bias in estimated return premiums for an array of illiquidity measures in Center for Research in Security Prices (CRSP) monthly return data. The upward bias is larger when illiquid securities are included in the sample, but persists even for NYSE/Amex stocks after decimalization. We introduce a methodological correction to eliminate the biases that simply involves weighted least squares (WLS) rather than ordinary least squares (OLS) estimation, and find evidence of smaller, but still significant, return premiums for illiquidity after implementing the correction. (C) 2010 Elsevier B.V. All rights reserved.