Is liquidity the missing link?
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Durandet al.(2006a) argue that the Australian market is both internationallyintegrated and domestically segmented. They find that the US-based three-factormodel captures returns of the largest stocks in Australia (evidence of internationalintegration), but that it is unable to account for the returns of the smallest stocks(evidence of domestic segmentation). This study resolves the puzzle left by Durandet al. (2006a). Incorporating a liquidity factor provides the missing link in theiranalysis: it results in a model that permits both the international integration of thelargest stocks and the model can account for the returns of the smallest stocks.Our analysis highlights the important role of liquidity in Australian asset pricing.
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Chan, Felix; Gould, John; Singh, Ranjodh; Yang, J. (2013)This paper proposes an approach for quantifying liquidity risk. Urgent liquidation of a portfolio will entail a liquidation discount. This is the market impact discount in value yielded by the immediate sale of the portfolio ...
Poskitt, Russell; Marsden, A.; Nguyen, N.; Shen, J. (2011)Purpose – The purpose of this paper is to examine the impact of the introduction of anonymous trading on the liquidity of New Zealand Stock Exchange (NZX)-listed stocks. Design/methodology/approach – The paper examines ...
Singh, R.; Gould, John; Chan, F.; Yang, J. (2016)Urgent liquidation of a large stock portfolio entails a liquidity cost-i.e., a "liquidation discount". This is the market impact discount in value yielded by the immediate sale of the portfolio relative to its in-hand ...