Publication Type

Journal Article

Publication Date

9-2012

Abstract

We estimate buy- and sell-order illiquidity measures (lambdas) for a comprehensive sample of NYSE stocks. We show that sell-order liquidity is priced more strongly than buy-order liquidity in the cross-section of equity returns. Indeed, our analysis indicates that the liquidity premium in equities emanates predominantly from the sell-order side. We also find that the average difference between sell and buy lambdas is generally positive throughout our sample period. Both buy and sell lambdas are significantly positively correlated with measures of funding liquidity such as the TED spread as well option implied volatility.

Keywords

Liquidity, Asset pricing

Discipline

Corporate Finance | Sales and Merchandising

Research Areas

Finance

Publication

Journal of Financial Economics

Volume

105

Issue

3

First Page

523

Last Page

541

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2012.04.006

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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