Momentum profits and time varying illiquidity effect

Hilal Anwar Butt, Nader Shahzad Virk

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


We study the variations in the US momentum returns using shocks to contemporaneous and lagged market illiquidity. We assert that the momentum strategy is hedged against systematic illiquidity risk. The impact of systematic illiquidity risk on momentum profits is shown to be distinctive from the effect of supplying liquidity. Our results show that the contemporaneous effect of systematic illiquidity dominates the opposite prediction of lagged systematic illiquidity and retains its significance even if variables capturing the time varying exposures of momentum returns to market risk are included in the analysis.

Original languageEnglish
Pages (from-to)253-259
Number of pages7
JournalFinance Research Letters
Early online date2 Jan 2017
Publication statusPublished - 1 Feb 2017
Externally publishedYes


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