TY - JOUR
T1 - Liquidity risk in stock returns
T2 - An event-study perspective
AU - Cao, Quanwei
AU - Petrasek, Lubomir
PY - 2014/1/1
Y1 - 2014/1/1
N2 - We examine in an event-study context what factors affect the relative performance of stocks during liquidity crises. We find that market risk, measured by the market beta, is not a good measure of expected abnormal stock returns on days with liquidity crises. Instead, abnormal stock returns during liquidity crises are strongly negatively related to liquidity risk, measured by the co-movement of stock returns with market liquidity. The degree of informational asymmetry and the ownership structure of the firm also help to explain abnormal stock returns on crisis days. Our findings have important implications for managing the liquidity risk of equity portfolios.
AB - We examine in an event-study context what factors affect the relative performance of stocks during liquidity crises. We find that market risk, measured by the market beta, is not a good measure of expected abnormal stock returns on days with liquidity crises. Instead, abnormal stock returns during liquidity crises are strongly negatively related to liquidity risk, measured by the co-movement of stock returns with market liquidity. The degree of informational asymmetry and the ownership structure of the firm also help to explain abnormal stock returns on crisis days. Our findings have important implications for managing the liquidity risk of equity portfolios.
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U2 - 10.1016/j.jbankfin.2013.09.020
DO - 10.1016/j.jbankfin.2013.09.020
M3 - Article
AN - SCOPUS:84903757836
VL - 45
SP - 72
EP - 83
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 1
ER -