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
Citation
Brennan, Michael; Chordia, Tarun; Subrahmanyam, Avanidhar; and TONG, Qing.
Sell-order liquidity and the cross-section of expected stock returns. (2012). Journal of Financial Economics. 105, (3), 523-541. Research Collection Lee Kong Chian School Of Business.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3232
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.