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Liquidity and return in the Swedish stock market

Personne, Gustav LU (2013) NEKM01 20131
Department of Economics
Abstract (Swedish)
This paper investigates if liquidity (or illiquidity) is a factor influencing returns on the Swedish stock market during the period of January 2001 to December of 2010. The time-series effects of illiquidity as well as differences in the effects of illiquidity across stocks with different characteristics are investigated. In addition, the paper addresses the question of whether sensitivity of stock returns to illiquidity, as well as to other explanatory factors, is persistent over time.

The results suggest that returns are sensitive to illiquidity during the sample period but that the effect decreases over time. For liquid stocks the relationship between return and illiquidity is found to be negative whilst the relationship is found to... (More)
This paper investigates if liquidity (or illiquidity) is a factor influencing returns on the Swedish stock market during the period of January 2001 to December of 2010. The time-series effects of illiquidity as well as differences in the effects of illiquidity across stocks with different characteristics are investigated. In addition, the paper addresses the question of whether sensitivity of stock returns to illiquidity, as well as to other explanatory factors, is persistent over time.

The results suggest that returns are sensitive to illiquidity during the sample period but that the effect decreases over time. For liquid stocks the relationship between return and illiquidity is found to be negative whilst the relationship is found to positive for illiquid stocks. Liquid stocks are found to be more sensitive to changes in illiquidity than illiquid stocks. (Less)
Please use this url to cite or link to this publication:
author
Personne, Gustav LU
supervisor
organization
course
NEKM01 20131
year
type
H1 - Master's Degree (One Year)
subject
keywords
Liquidity, Time series regressions, Swedish stock market, CAPM, Fama-French three-factor model
language
English
id
3811253
date added to LUP
2013-06-20 16:13:04
date last changed
2013-06-20 16:13:04
@misc{3811253,
  abstract     = {This paper investigates if liquidity (or illiquidity) is a factor influencing returns on the Swedish stock market during the period of January 2001 to December of 2010. The time-series effects of illiquidity as well as differences in the effects of illiquidity across stocks with different characteristics are investigated. In addition, the paper addresses the question of whether sensitivity of stock returns to illiquidity, as well as to other explanatory factors, is persistent over time.

The results suggest that returns are sensitive to illiquidity during the sample period but that the effect decreases over time. For liquid stocks the relationship between return and illiquidity is found to be negative whilst the relationship is found to positive for illiquid stocks. Liquid stocks are found to be more sensitive to changes in illiquidity than illiquid stocks.},
  author       = {Personne, Gustav},
  keyword      = {Liquidity,Time series regressions,Swedish stock market,CAPM,Fama-French three-factor model},
  language     = {eng},
  note         = {Student Paper},
  title        = {Liquidity and return in the Swedish stock market},
  year         = {2013},
}