QB Huang - Academia.edu (original) (raw)
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Papers by QB Huang
This paper studies equilibrium asset pricing with liquidity riskthe risk arising from unpredictab... more This paper studies equilibrium asset pricing with liquidity riskthe risk arising from unpredictable changes in liquidity over time. It is shown that a security's required return depends on its expected illiquidity and on the covariances of its own return and illiquidity with market return and market illiquidity. This gives rise to a liquidityadjusted capital asset pricing model. Further, if a security's liquidity is persistent, a shock to its illiquidity results in low contemporaneous returns and high predicted future returns. Empirical evidence based on cross-sectional tests is consistent with liquidity risk being priced. * We are grateful for conversations with
This paper studies equilibrium asset pricing with liquidity riskthe risk arising from unpredictab... more This paper studies equilibrium asset pricing with liquidity riskthe risk arising from unpredictable changes in liquidity over time. It is shown that a security's required return depends on its expected illiquidity and on the covariances of its own return and illiquidity with market return and market illiquidity. This gives rise to a liquidityadjusted capital asset pricing model. Further, if a security's liquidity is persistent, a shock to its illiquidity results in low contemporaneous returns and high predicted future returns. Empirical evidence based on cross-sectional tests is consistent with liquidity risk being priced. * We are grateful for conversations with