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2021-01

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Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/182110

Analyzing the Nonlinear Pricing of Liquidity Risk according to the Market State

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https://doi.org/10.1016/j.frl.2020.101515

Abstract

This study examines the asymmetric impact of systemic liquidity on asset prices across market states. We use time-series conditional quantile regressions to estimate an otherwise traditional liquidity-augmented three-factor model for asset prices. We find the exposure of equity returns to systemic liquidity risk to be dependent on the market state. Contrary to general assumptions, our results show that liquidity is not always a relevant factor for explaining stock market returns and that it only becomes relevant when the market state is particularly good or particularly bad. Search-for-yield and flight-to-liquidity considerations help to explain our findings.

Subject

Liquiditat (Economia), Programació no lineal, Gestió d'actius i passius, Risc (Economia), Economia de mercat

Subject (English)

Liquidity (Economics), Nonlinear programming, Asset-liability management, Risk, Market economy

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Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

Citation

CHULIÁ SOLER, Helena, KOSER, Christoph and URIBE GIL, Jorge Mario. Analyzing the Nonlinear Pricing of Liquidity Risk according to the Market State. Finance Research Letters. 2021. Vol. 38, num. 101515. ISSN 1544-6131. [consulted: 11 of August of 2026]. Available at: https://hdl.handle.net/2445/182110

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