Asset liquidity and stock returns
Ze-To, S. 2016. Asset liquidity and stock returns. Advances in Accounting. 35, pp. 177-196. https://doi.org/10.1016/j.adiac.2016.08.002
Ze-To, S. 2016. Asset liquidity and stock returns. Advances in Accounting. 35, pp. 177-196. https://doi.org/10.1016/j.adiac.2016.08.002
| Title | Asset liquidity and stock returns |
|---|---|
| Type | Journal article |
| Authors | Ze-To, S. |
| Abstract | We document the significant predictive power of firms' asset liquidity in the cross section of subsequent stock returns. The annual return spread between portfolios featuring the highest and lowest levels of asset liquidity is significantly positive. Our proposed measure of asset liquidity outperforms those measures developed by Gopalan et al. (2012) in predicting returns. The asset liquidity anomaly also provides significantly positive alphas when controlling for the asset pricing factors in the Fama and French (1993) three-factor model and the Carhart (1997) four-factor model. Asset liquidity exhibits strong return forecasting power even after controlling for acknowledged cross-sectional determinants of return. The positive relation between asset liquidity and future returns tends to be stronger for firms with greater asset productivity, higher quality cash flow and lower capital investment. |
| Keywords | Asset liquidity |
| Cross sectional return | |
| Asset productivity | |
| Journal | Advances in Accounting |
| Journal citation | 35, pp. 177-196 |
| ISSN | 0882-6110 |
| 2590-1699 | |
| Year | 2016 |
| Publisher | Elsevier |
| Digital Object Identifier (DOI) | https://doi.org/10.1016/j.adiac.2016.08.002 |
| Publication dates | |
| Published | Dec 2016 |