Year: 2018
Author: Ludwig, Michael
Credit and Capital Markets – Kredit und Kapital, Vol. 51 (2018), Iss. 2 : pp. 205–225
Abstract
The influence of liquidity costs and liquidity risk on asset returns has been proven by several empirical studies. This paper analyzes the conditional version of the liquidity-adjusted capital asset pricing model and shows that betas significantly vary over different economic regimes and that liquid portfolios provide diversification benefits compared with illiquid portfolios. The results support the effects of a flight-to-liquidity. The time variation of liquidity betas induces additional risk for investors, which has important implications for investment decisions and asset allocation.
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/ccm.51.2.205
Credit and Capital Markets – Kredit und Kapital, Vol. 51 (2018), Iss. 2 : pp. 205–225
Published online: 2018-06
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 21
Keywords: CAPM liquidity risk regime switching model time variation liquidity betas G11 G1
Author Details
| Section Title | Page | Action | Price |
|---|---|---|---|
| Michael Ludwig: The Time Variation of Liquidity Risk in US Stock Markets | 1 |