Pricing of time-varying liquidity risk in Finnish stock market: new evidence

Using two recently developed illiquidity measures, we estimate a conditional version of liquidity-adjusted capital asset pricing model (LCAPM), which allows for a time-varying decomposition of the total illiquidity premium into a level component and three risk components. The total estimated annualized illiquidity premium for the Finnish equities during 1997–2015 is 1.13–1.90% depending on the illiquidity measure. Of the three systematic liquidity risk components, risk arising from hedging of wealth shocks is the most important followed by commonality in liquidity risk, whereas flight to liquidity risk is not significantly priced in the Finnish stock market. Our results show that the liquidity risk is time varying, therefore the models estimating the risk-return relationship should address the issue of conditionality.     

Inequality and the composition of taxes

This paper analyses the political economics of the composition of taxes. Taxes may be levied on income, or on expenditure, with the median voter pivotal in the theoretical framework analysed. As in Meltzer and Richard (J Polit Econ 89:914–927, 1981), income taxes increase with inequality. Conversely, expenditure taxes first increase and then decrease with increasing inequality. The extent to which taxes are levied on income relative to expenditure unambiguously rises with inequality. In contrast to government size evidence, cross-country data exhibit a robust positive correlation between the extent to which taxes are levied on income relative to expenditure and inequality. Consistent with the theory, this relationship holds most significantly in stronger democracies.     

Can the FSCORE add value to anomaly-based portfolios? A reality check in the German stock market

Financial Markets and Portfolio Management - This paper examines the added value of using financial statement information, particularly that of Piotroski’s (J Account Res 38:1, 2000....