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http://hdl.handle.net/10071/6739
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Title: Stock returns and the volatility of liquidity
Authors: Pereira, J.
Zhang, H.
Issue Date: 2010
Publisher: Cambridge University Press
Abstract: This paper offers a rational explanation for the puzzling empirical fact that stock returns decrease with an increase in the volatility of liquidity. We model liquidity as a stochastic price impact process and define the liquidity premium as the additional return necessary to compensate a multiperiod investor for the adverse price impact of trading. The model demonstrates that a fully rational, utility maximizing, risk-averse investor can take advantage of time-varying liquidity by adapting his trades to the state of liquidity. We provide new empirical evidence supportive of the model.
Description: WOS:000284129700010 (Nº de Acesso Web of Science)
“Prémio Científico ISCTE-IUL 2011”
URI: https://ciencia.iscte-iul.pt/public/pub/id/10633
http://hdl.handle.net/10071/6739
ISSN: 0022-1090
Appears in Collections:DF-RI - Artigos em revistas internacionais com arbitragem científica

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