Transaction costs, liquidity risk, and the CCAPM

Weimin Liu; Di Luo; Huainan Zhao

doi:10.1016/j.jbankfin.2015.11.011

Transaction costs, liquidity risk, and the CCAPM

Weimin Liu, Di Luo, Huainan Zhao

Nottingham University Business School China

Research output: Journal Publication › Article › peer-review

10 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 language	English
Pages (from-to)	126-145
Number of pages	20
Journal	Journal of Banking and Finance
Volume	63
DOIs	https://doi.org/10.1016/j.jbankfin.2015.11.011
Publication status	Published - 1 Feb 2016

Keywords

Consumption-based asset pricing
Liquidity risk
Transaction costs

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.jbankfin.2015.11.011

Cite this

@article{f16f76df711a42d19148f20bbc86bfda,

title = "Transaction costs, liquidity risk, and the CCAPM",

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.",

keywords = "Consumption-based asset pricing, Liquidity risk, Transaction costs",

author = "Weimin Liu and Di Luo and Huainan Zhao",

note = "Publisher Copyright: {\textcopyright} 2015 Elsevier B.V.",

year = "2016",

month = feb,

day = "1",

doi = "10.1016/j.jbankfin.2015.11.011",

language = "English",

volume = "63",

pages = "126--145",

journal = "Journal of Banking and Finance",

issn = "0378-4266",

publisher = "Elsevier B.V.",

}

TY - JOUR

T1 - Transaction costs, liquidity risk, and the CCAPM

AU - Liu, Weimin

AU - Luo, Di

AU - Zhao, Huainan

PY - 2016/2/1

Y1 - 2016/2/1

N2 - 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.

AB - 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.

KW - Consumption-based asset pricing

KW - Liquidity risk

KW - Transaction costs

UR - http://www.scopus.com/inward/record.url?scp=84949984167&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2015.11.011

DO - 10.1016/j.jbankfin.2015.11.011

M3 - Article

AN - SCOPUS:84949984167

SN - 0378-4266

VL - 63

SP - 126

EP - 145

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

ER -

Transaction costs, liquidity risk, and the CCAPM

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this