Using direct transaction cost measures for a long but cross-sectionally restricted sample of Dow Jones firms, Jones (2002) uncovers a positive relation between aggregate illiquidity
and future market returns in a 1900 to 2000 sample but not in a post-1950 sample.
They found that local illiquidity
risk is quite relevant for pricing of stocks in emerging markets.
Here's why I think the illiquidity
issue is getting traction and why Nasdaq's move is well-timed.
Better than government bonds, but far less attractive than many other asset classes, particularly when adjusted for the illiquidity
The weight of the Illiquidity
Factor grew throughout the year, suggesting that managers in the space are taking greater illiquidity
risk as they search for yield.
To highlight why illiquidity
has become such an issue, consider a statistic bandied about in the market: If mutual bond funds had reduced their positions by 5% in 2007, investment banks would have had to increase their balance sheets by 10%.
Then, we estimate the impact of market illiquidity
on this association.
The Impact of Income Taxes on the Illiquidity
Svetlana Vukcevik agrees with Minister Stavreski's statement that the National Bank of the Republic of Macedonia, which auctions treasury bills and collects money from banks, is to be blamed for the illiquidity
but only to the point when we get reminded that the Government plays the same game too by selling other type of securities--government securities.
Two primary factors are the compensation investors require to hold a security that is less liquid than its nominal counterpart, termed the illiquidity
premium, and the insurance value they attach to obtaining protection against inflation risk, known as the inflation risk premium.
The British banking system is floating face down in a pool of its own illiquidity
and it's pointless us chucking it another lifeline" - Writer Will Self.
Nevertheless, the current levels of market illiquidity
are elevated in relation to historical levels, and the issue of liquidity has become more important to fair value than it has been historically.