Liquidity skewness premium

Giho Jeong, Jangkoo Kang, Kyung Yoon Kwon

Research output: Contribution to journalArticle

Abstract

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.
LanguageEnglish
Pages130-150
Number of pages21
JournalNorth American Journal of Economics and Finance
Volume46
Early online date7 Sep 2018
DOIs
Publication statusPublished - 30 Nov 2018

Fingerprint

Skewness
Liquidity
Premium
Investors
Illiquidity
Risk-averse
Asymmetric preferences
Stock market
Turnover
Price impact

Keywords

  • liquidity premium
  • liquidity skewness
  • extreme liquidity risk
  • asset pricing

Cite this

Jeong, Giho ; Kang, Jangkoo ; Kwon, Kyung Yoon. / Liquidity skewness premium. In: North American Journal of Economics and Finance. 2018 ; Vol. 46. pp. 130-150.
@article{5a0b4620659e4cc8bde047eacbaaa0e7,
title = "Liquidity skewness premium",
abstract = "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.",
keywords = "liquidity premium, liquidity skewness, extreme liquidity risk, asset pricing",
author = "Giho Jeong and Jangkoo Kang and Kwon, {Kyung Yoon}",
year = "2018",
month = "11",
day = "30",
doi = "10.1016/j.najef.2018.04.015",
language = "English",
volume = "46",
pages = "130--150",
journal = "North American Journal of Economics and Finance",
issn = "1062-9408",

}

Liquidity skewness premium. / Jeong, Giho; Kang, Jangkoo; Kwon, Kyung Yoon.

In: North American Journal of Economics and Finance, Vol. 46, 30.11.2018, p. 130-150.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Liquidity skewness premium

AU - Jeong, Giho

AU - Kang, Jangkoo

AU - Kwon, Kyung Yoon

PY - 2018/11/30

Y1 - 2018/11/30

N2 - 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.

AB - 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.

KW - liquidity premium

KW - liquidity skewness

KW - extreme liquidity risk

KW - asset pricing

U2 - 10.1016/j.najef.2018.04.015

DO - 10.1016/j.najef.2018.04.015

M3 - Article

VL - 46

SP - 130

EP - 150

JO - North American Journal of Economics and Finance

T2 - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

SN - 1062-9408

ER -