Liquidity and Asset prices: An Empirical Investigation of the Nordic Stock Markets

Hilal Anwar Butt, Nader Shahzad Virk

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

This paper presents a simplified single period asset-pricing model adjusted for liquidity and tests it for the Nordic markets. The detailed empirical evidence is presented from Finnish test case. Empirical testing of small yet developed markets is motivated by the increased relevance of the illiquidity effect for illiquid assets/markets. The main evidence reports liquidity risk makes sufficiently larger part of predicted factor risk premium than the market risk, contrary to comparable US evidence. This highlights the ability of liquidity related model betas in capturing the time variation in expected returns across illiquid (Nordic) markets than market beta.

Original languageEnglish
Pages (from-to)672-705
Number of pages34
JournalEuropean Financial Management
Volume21
Issue number4
DOIs
Publication statusPublished - 1 Sep 2015
Externally publishedYes

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