A4 Conference proceedings

Liquidity risk and asset pricing in French stock market: A comparative analysis

Open Access publication

LUT Authors / Editors

Publication Details
Authors: Ahmed Sheraz, Gorbenko Arseny
Publication year: 2015
Language: English
Title of parent publication: Global Business Publications
JUFO-Level of this publication: 0
Open Access: Open Access publication

This paper investigates pricing of liquidity in the French stock market. The authors utilize the liquidity-adjusted capital asset pricing model (LCAPM) recently developed by Acharya and Pedersen (2005) and incorporates three different liquidity measures, namely Amihud, FHT, and PQS, to test whether liquidity level and risks significantly affect stock returns. It appears that the findings largely depend on the liquidity measure used. In general, the results exhibit more evidence for insignificant influence of liquidity level and risks as well as market risk on stock returns. Nevertheless, the difference in the results between these measures provides new insight to the existing literature on this topic. The Amihud-based findings might indicate that market resiliency is not priced in the French stock market. At the same time the contradicting results from FHT and PQS provide some foundation for the hypothesis that one of two leftover liquidity dimensions - market depth or breadth - should significantly affect stock returns.

Last updated on 2017-27-03 at 11:34