Acharya and Pedersen (2005, hereafter AP) develop the liquidity-adjusted CAPM (LCAPM) that assets with higher illiquidity costs, higher liquidity risk, and higher market risk have higher average rates of return. Our paper conducts an independent replication and two out-of-sample tests with three datasets (US 1964 to 1999, US 2000 to 2016, and Japan 1978 to 2012), six versions of the LCAPM, and eight test portfolios. We first consider the “one-variable LCAPM test” for the intercept, the illiquidity cost effect, and the net liquidity risk effect. We then consider the “two-variable LCAPM test” that further requires that the market risk premium and the net liquidity risk premium are identical as implied by the AP theory. The LCAPM satisfies the one-variable test in 36.0% of regressions and the two-variable test in 5.2% of regressions conducted using the US data. This result is qualitatively similar across US samples and is consistent with the findings of an independent study by Holden and Nam (2018). The LCAPM does not satisfy either of the two tests in the Japanese market.