Economics, Econometrics and Finance
4 years ago

Global Liquidity Risks Impacting Stock Prices Revealed in New Study

RePEc: Research Papers in Economics
The World Price of Liquidity Risk
Kuan‐Hui Lee

Paper Summary

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The study looked at how liquidity risk affects stock prices globally. They analyzed 25,000 stocks from 48 countries between 1988 and 2004. While a specific model didn't hold, they found that liquidity risks related to stock returns and market factors are priced. The US market plays a big role in world-market liquidity risk. This suggests that global liquidity shocks impact stock prices.