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The night and day of Amihud's (2002) liquidity measure
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Barardehi, Yashar H., Bernhardt, Dan, Ruchti, Thomas G. and Weidenmier, Marc (2021) The night and day of Amihud's (2002) liquidity measure. The Review of Asset Pricing Studies, 11 (2). pp. 269-308. raaa022. doi:10.1093/rapstu/raaa022 ISSN 2045-9920.
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WRAP-night-day-Amihud's-liquidity-measure-Bernhardt-2020.pdf - Accepted Version - Requires a PDF viewer. Download (3775Kb) | Preview |
Official URL: https://doi.org/10.1093/rapstu/raaa022
Abstract
Amihud’s stock (il)liquidity measure averages daily ratios of the absolute close-to-close return to dollar volume, including overnight returns. Our modified measure uses open-to-close returns matching return and trading volume measurement windows. It is more strongly correlated with trading-cost measures (by 8%–37%) and better explains cross-sections of returns, doubling estimated liquidity premiums. Using nonsynchronous trading near close, we show overnight returns are primarily information driven: including them in Amihud’s proxy for price impacts of trading magnifies measurement error, understating liquidity premiums. Our modification helps wherever Amihud’s measure is required. Our measures are publicly available for 1964–2019 and can be updated.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Liquidity (Economics), Stocks -- Prices, Assets (Accounting), Capital assets pricing model | ||||||||
| Journal or Publication Title: | The Review of Asset Pricing Studies | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 2045-9920 | ||||||||
| Official Date: | June 2021 | ||||||||
| Dates: |
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| Volume: | 11 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 269-308 | ||||||||
| Article Number: | raaa022 | ||||||||
| DOI: | 10.1093/rapstu/raaa022 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Reuse Statement (publisher, data, author rights): | This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Asset Pricing Studies following peer review. The version of record Yashar H Barardehi, Dan Bernhardt, Thomas G Ruchti, Marc Weidenmier, The Night and Day of Amihud’s (2002) Liquidity Measure, The Review of Asset Pricing Studies, Volume 11, Issue 2, June 2021, Pages 269–308, https://doi.org/10.1093/rapstu/raaa022, is available online at: https://doi.org/10.1093/rapstu/raaa022 | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 7 October 2020 | ||||||||
| Date of first compliant Open Access: | 1 March 2023 | ||||||||
| Is Part Of: | 1 | ||||||||
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