Liquidity skewness premium

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Risk-averse investors may dislike decrease of liquidity rather than increase of liquidity, and thus there can be asymmetric preference in variation of liquidity. In addition, investors are likely to avoid extreme illiquidity. This paper examines whether the skewness of an individual firm's liquidity capturing asymmetric distribution of liquidity and extreme illiquidity is priced in the US stock market. Using the skewness of the daily price impact, we find that it is positively priced, and this positive relation is significant up to eight months after controlling for other effects. Moreover, we find our results remain significant with the skewness of alternative liquidity measures, i.e., dollar-volume, and turnover.
Publisher
ELSEVIER SCIENCE INC
Issue Date
2018-11
Language
English
Article Type
Article
Citation

NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE, v.46, pp.130 - 150

ISSN
1062-9408
DOI
10.1016/j.najef.2018.04.015
URI
http://hdl.handle.net/10203/248735
Appears in Collection
MT-Journal Papers(저널논문)
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