{"title":"Liquidity and Stock Returns In Europe","authors":"Msci Inc.","doi":"10.2139/ssrn.1452827","DOIUrl":null,"url":null,"abstract":"The Liquidity style factor in the new and enhanced Barra Europe Equity Model (EUE3) helps to assess the systematic risk associated with infrequent trading. In this Research Bulletin we look at the risk and return to the EUE3 Liquidity factor in different market environments, the link between stock liquidity and stock size and sector, and the relationship between the significance of the Liquidity factor and market performance. This factor’s return varied with the market cycle during the rally of 1995-2000 and the correction of 2000-2003. In the more recent cycle, there was less dispersion between the rally and the correction. We also find that there are some systematic relationships between a company’s liquidity and its size and sector. Finally, we find that the EUE3 Liquidity factor return tends to be statistically significant when the market moves up or down in a meaningful way, which is consistent with our analysis of the Liquidity factor in GEM2.","PeriodicalId":47599,"journal":{"name":"European Journal of Finance","volume":"10 1","pages":""},"PeriodicalIF":2.2000,"publicationDate":"2009-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"European Journal of Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.2139/ssrn.1452827","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
The Liquidity style factor in the new and enhanced Barra Europe Equity Model (EUE3) helps to assess the systematic risk associated with infrequent trading. In this Research Bulletin we look at the risk and return to the EUE3 Liquidity factor in different market environments, the link between stock liquidity and stock size and sector, and the relationship between the significance of the Liquidity factor and market performance. This factor’s return varied with the market cycle during the rally of 1995-2000 and the correction of 2000-2003. In the more recent cycle, there was less dispersion between the rally and the correction. We also find that there are some systematic relationships between a company’s liquidity and its size and sector. Finally, we find that the EUE3 Liquidity factor return tends to be statistically significant when the market moves up or down in a meaningful way, which is consistent with our analysis of the Liquidity factor in GEM2.
期刊介绍：
The European Journal of Finance publishes a full range of research into theoretical and empirical topics in finance. The emphasis is on issues that reflect European interests and concerns. The journal aims to publish work that is motivated by significant issues in the theory or practice of finance. The journal promotes communication between finance academics and practitioners by providing a vehicle for the publication of research into European issues, stimulating research in finance within Europe, encouraging the international exchange of ideas, theories and the practical application of methodologies and playing a positive role in the development of the infrastructure for finance research.
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