Liquidity skewness premium |
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| Affiliation: | 1. College of Business, Korea Advanced Institute of Science and Technology, 85 Hoegiro, Dongdaemoon-gu, Seoul 02455, South Korea;2. Department of Accounting and Finance, Strathclyde Business School, University of Strathclyde, Glasgow G4 0QU, UK;1. School of Finance, Jiangxi University of Finance and Economics, Nanchang, China;2. School of Finance, Shanghai University of Finance and Economics, Shanghai, China;3. School of Economics, Shanghai University of Finance and Economics, Shanghai, China;1. JL Corporation, 1-4-9 Awaza, Nishi-ku, Osaka-shi, Osaka 550-0011, Japan;2. Faculty of Economics and Business Administration, Fukushima University, 1 Kanayagawa, Fukushima-shi, Fukushima 960-1296, Japan;3. Faculty of Economics, Chuo University, 742-1 Higashinakano, Hachioji-shi, Tokyo 192-0393, Japan;1. Department of Quantitative Methods, Faculty of Economics, University of Split, Cvite Fiskovića 5, Split, Croatia;2. Department of Finance, Faculty of Economics, University of Split, Cvite Fiskovića 5, Split, Croatia;1. St. Olaf College, Department of Economics, United States;2. Denison University, Department of Economics, United States |
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| Abstract: | Risk-averse investors may dislike decrease of liquidity rather than increase of liquidity, and thus there can be asymmetric preference in variation of liquidity. In addition, investors are likely to avoid extreme illiquidity. This paper examines whether the skewness of an individual firm’s liquidity capturing asymmetric distribution of liquidity and extreme illiquidity is priced in the US stock market. Using the skewness of the daily price impact, we find that it is positively priced, and this positive relation is significant up to eight months after controlling for other effects. Moreover, we find our results remain significant with the skewness of alternative liquidity measures, i.e., dollar-volume, and turnover. |
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| Keywords: | Liquidity premium Liquidity skewness Extreme liquidity risk Asset pricing |
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