Critical Finance Review > Vol 8 > Issue

Illiquidity and Stock Returns: Cross-Section and Time-Series Effects: A Replication

Larry Harris, USC Marshall School of Business, USA, LHarris@marshall.usc.edu Andrea Amato, UC Berkeley Haas School of Business, USA, andrea_amato@mfe.berkeley.edu
 
Suggested Citation
Larry Harris and Andrea Amato (2019), "Illiquidity and Stock Returns: Cross-Section and Time-Series Effects: A Replication", Critical Finance Review: Vol. 8: No. . http://dx.doi.org/10.1561/104.00000058

Forthcoming: 31 Mar 2019
© 2018 Larry Harris and Andrea Amato
 
Subjects
 
Keywords
G12G11G14G10
LiquidityAsset PricingReplication StudiesPrice-Volume RelationsTransaction Costs
 

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In this article:
1. Introduction
2. Replication
3. An Additional Analysis
4. Conclusion
References

Abstract

This paper replicates and extends the Amihud (2002) study that links liquidity to asset pricing. Using the current version of the CRSP dataset, we obtain essentially the same results that Amihud presents. The same methods applied to more recent data show a much weaker relation between liquidity and asset pricing. Finally, we compare the explanatory power of Amihud’s illiquidity measure to that of other simple measures that use the same data for their calculation. We find that the Amihud illiquidity measure is no better than substantially simpler measures.

DOI:10.1561/104.00000058