Asset Pricing with Liquidity Risk: Evidence from the US Stock Market
Authors: Faiz Rasool, Nimra Riaz, Madiha Afzal, Muhammad Mudassar Hussain
Journal: International Journal of Advanced Finance and Accounting (IJAFA), ISSN 2765-8457
Citation: IJAFA 6(1): 1-10, 2025-01-30.
DOI: 10.5281/zenodo.14768867
PDF: Download full-text PDF
Type: Original Research
Abstract
This study investigates the impact of liquidity risk on asset pricing within the US stock market, exploring the complex relationship between market liquidity and stock returns. The research examines how liquidity risk factors contribute to stock price variations by analyzing a comprehensive dataset spanning multiple market conditions. The study uses advanced econometric techniques and panel data analysis to reveal significant evidence of liquidity risk's substantial role in determining asset pricing mechanisms. The findings contribute to the existing financial literature by providing empirical insights into the nuanced interactions between market liquidity, risk premiums, and stock returns. Keywords Asset Pricing; Liquidity Risk; Stock Market; Financial Markets; Risk Premium; Market Efficiency Citation Rasool, F., Riaz, N., Afzal, M. &
Keywords
Asset Pricing, Liquidity Risk, Stock Market, Financial Markets, Risk Premium, Market Efficiency
Full Text
This study investigates the impact of liquidity risk on asset pricing within the US stock market, exploring the complex relationship between market liquidity and stock returns. The research examines how liquidity risk factors contribute to stock price variations by analyzing a comprehensive dataset spanning multiple market conditions. The study uses advanced econometric techniques and panel data analysis to reveal significant evidence of liquidity risk's substantial role in determining asset pricing mechanisms. The findings contribute to the existing financial literature by providing empirical insights into the nuanced interactions between market liquidity, risk premiums, and stock returns. Keywords Asset Pricing; Liquidity Risk; Stock Market; Financial Markets; Risk Premium; Market Efficiency Citation Rasool, F., Riaz, N., Afzal, M. &