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Title: Liquidity and asset pricing
Author: Su, Youjin
Awarding Body: University of Aberdeen
Current Institution: University of Aberdeen
Date of Award: 2013
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This thesis is an empirical analysis which is focussed on the potential relationship between liquidity and asset pricing; where its key objective is to provide an assessment about the role for liquidity in asset pricing models. The data sample covers the United Kingdom from 1987 to 2009 and the methodological approaches include; Fama and MacBeth (1973) cross section regressions; time series regression analysis; factor analysis; and, non-nested testing. Several liquidity measures are compared, including the Amivest, the Hui-Heubel and the Amihud measures of liquidity. The role of unexpected liquidity and monetary policy is also considered. Building on earlier findings in the thesis, a deeper examination of the role of liquidity in explicit asset pricing frameworks, such as the capital asset pricing model and the Fama-French three factor model, then takes place through incorporation of the Hui- Heubel and Amihud measures of liquidity. Overall, the results suggest that conditions of declining liquidity (rising illiquidity) appear to be associated with increasing risk premia. This observation appears also to apply when portfolios are sorted by size. Finally, the conclusion is reached that modelling liquidity within an asset pricing framework is likely to be very useful, particularly given the changes to the financial market horizon where liquidity as a concept has come increasingly to the fore because of current government policies associated with quantitative easing.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Liquidity (Economics) ; Assets (Accounting)