Transaction costs, liquidity risk, and the CCAPM

Weimin Liu, Di Luo, Huainan Zhao

Research output: Journal PublicationArticlepeer-review

6 Citations (Scopus)

Abstract

In this paper, we make a liquidity adjustment to the consumption-based capital asset pricing model (CCAPM) and show that the liquidity-adjusted CCAPM is a generalized model of Acharya and Pedersen (2005). Using different proxies for transaction costs such as the effective trading costs measure of Hasbrouck (2009) and the bid-ask spread estimates of Corwin and Schultz (2012), we find that the liquidity-adjusted CCAPM explains a larger fraction of the cross-sectional return variations.

Original languageEnglish
Pages (from-to)126-145
Number of pages20
JournalJournal of Banking and Finance
Volume63
DOIs
Publication statusPublished - 1 Feb 2016

Keywords

  • Consumption-based asset pricing
  • Liquidity risk
  • Transaction costs

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Transaction costs, liquidity risk, and the CCAPM'. Together they form a unique fingerprint.

Cite this