The Korean Journal of Financial Studies (재무관리논총)
- Volume 2 Issue 1
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- Pages.127-144
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- 1995
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- 1226-1467(pISSN)
Asset Pricing and the Volume Effect
- Park, Jin-Woo (College of Business and Economics, Hankuk University of Foreign Studies) ;
- Dukas, Stephen (College of Business and Economics, Hankuk University of Foreign Studies)
- Published : 1995.05.31
Abstract
Previous literature in financial economics documents the existence of a liquidity premium in expected returns, measured by the bid-ask spread. This study provides a more comprehensive test of the egect of liquidity on common stock returns by including trading volume as an additional liquidity measure. we find that trading volume is a relevant measure of liquidity, and affects expected returns even aher controlling for the effects of systematic risk, firm size, and the relative bid-ask spread. We also find that trading volume complements the bid-ask spread as a liquidity measure, and provides additional information about the liquidity premium. The liquidity effect emerges in non-January months as a volume effect, in addition to the spread effect in January documented by Eleswarapu and Reinganum(1993).
Keywords