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Illiquidity Premium: A Survey

Oberoi, Jaideep S (2016) Illiquidity Premium: A Survey. Not for publication (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:70630)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)

Abstract

The objective of this report is to survey existing findings on the estimates of illiquidity premia for a range of asset classes, and on the feasibility and conditions required to earn these premia. There is a large amount of evidence of illiquidity premia in a variety of markets. Across equity and bond markets, less liquid securities have higher expected returns. In addition, securities whose returns or liquidity covary with aggregate (systematic) liquidity and liquidity in the financial system (funding liquidity), also have higher expected returns than securities with lower exposures. These results have been found across a range of markets, after controlling for well known market risk factors and firm risk characteristics.

Secondly, with increased evidence of liquidity clienteles and the associated market segmentation, strategic features are placed into local illiquidity buckets. Research suggests care should be taken in evaluating whether sufficient compensation is priced into certain types of illiquid securities.

Item Type: Research report (external and confidential)
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Division of Computing, Engineering and Mathematical Sciences > School of Mathematics, Statistics and Actuarial Science
Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Jaideep Oberoi
Date Deposited: 04 Dec 2018 16:37 UTC
Last Modified: 16 Feb 2021 14:00 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/70630 (The current URI for this page, for reference purposes)
Oberoi, Jaideep S: https://orcid.org/0000-0002-1101-7612
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