Essays on illiquidity premium

• Ano de defesa: 2014
• Autor(a) principal: Pereira, Ricardo Buscariolli
• Orientador(a): Mergulhão, João de Mendonça
• Tipo de documento: Tese
• Tipo de acesso: Acesso aberto
• Idioma: eng
• Palavras-chave em Português: Liquidity; Empirical asset pricing
• Link de acesso: http://hdl.handle.net/10438/11838

This dissertation is composed of three related essays on the relationship between illiquidity and returns. Chapter 1 describes the time-series properties of the relationship between market illiquidity and market return using both yearly and monthly datasets. We find that stationarized versions of the illiquidity measure have a positive, significant, and puzzling high premium. In Chapter 2, we estimate the response of illiquidity to a shock to returns, assuming that causality runs from returns to illiquidity and find that an increase in firms' returns lowers illiquidity. In Chapter 3 we take both effects into account and account for the endogeneity of returns and illiquidity to estimate the liquidity premium. We find evidence that the illiquidity premium is a smaller than the previous evidence suggests. Finally, Chapter 4 shows topics for future research where we describe a return decomposition with illiquidity costs.