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 factor.
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 Premium when
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.
