Liquidity in asset pricing: new Australian evidence using low-frequency data created by Daniel Chai, Robert Faff, and Philip Gharghori

By:

Chai, Daniel [author]

Contributor(s):

Material type: Text

TextSeries: Australian journal of management ; Volume 38, number 2Los Angeles: Sage, 2013Content type:

text

Media type:

unmediated

Carrier type:

volume

ISSN:

0312-8962

Subject(s):

Asset pricing -- Australian evidence -- Fama-French model

LOC classification:

HD31 AUS

Online resources:

Click here to access online

Abstract: Employing a new proxy for liquidity, this paper examines its impact on stock returns in the context of the Fama-French framework. We augment the Carhart four-factor model with a liquidity factor in our asset pricing tests. Using an extensive dataset drawn from the Australian equities market, we find that liquidity explains a portion of the common variation in stock returns even after controlling for size, book-to-market and momentum. However, our findings suggest that the liquidity factor only adds marginal explanatory power to contemporary asset pricing models.

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Holdings
Item type	Current library	Call number	Vol info	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HD31 AUS (Browse shelf(Opens below))	Vol. 38, no.2 (pages375-400)	Not for loan	For in house use only

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Previous	HD31 AUS A revolution in finance?/	HD31 AUS Dissecting anomalies in the Australian stock market	HD31 AUS Gender perceptions of work-life balance : management implications for full-time employees in Australia/	HD31 AUS Liquidity in asset pricing: new Australian evidence using low-frequency data	HD31 AUS Verifying the Miles and Snow strategy types in Australian small- and medium-size enterprises/	HD31 AUS Does portfolio emulation outperform its target funds?	HD31 AUS Determinants of long-term debt issuing decisions: an alternative approach	Next

Employing a new proxy for liquidity, this paper examines its impact on stock returns in the context of the Fama-French framework. We augment the Carhart four-factor model with a liquidity factor in our asset pricing tests. Using an extensive dataset drawn from the Australian equities market, we find that liquidity explains a portion of the common variation in stock returns even after controlling for size, book-to-market and momentum. However, our findings suggest that the liquidity factor only adds marginal explanatory power to contemporary asset pricing models.

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