Extreme Downside Liquidity Risk

Submitted on 22nd November 2018

The recent empirical asset pricing literature documents that investors care about the systematic downside and crash exposure of stock returns and shows that stocks with such exposures earn a significant risk-premium. At the same time, the theoretical literature shows that investors should care about the systematic component of liquidity risk and there are successful attempts to show empirically that systematic liquidity risk also bears a premium in the cross-section of returns. The aim of this paper is to merge these two important strands of the literature for the first time.

University Mannheim, Aalto University, University of St. Gallen
Length of Resource
78 pages
Stefan Ruenzi, Michael Ungeheuer & Florian Weigerta
Date Published
Publication Type
Resource Type