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Transaction costs, liquidity risk, and the CCAPM

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journal contribution
posted on 10.02.2017, 11:02 by Weimin Liu, Di Luo, Huainan ZhaoHuainan Zhao
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.

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Banking & Finance

Volume

63

Pages

126 - 145

Citation

LIU, W., LUO, D. and ZHAO, H., 2016. Transaction costs, liquidity risk, and the CCAPM. Journal of Banking & Finance, 63, pp. 126-145.

Publisher

© Elsevier

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2015-12-07

Notes

This paper was accepted for publication in the journal Journal of Banking & Finance and the definitive published version is available at http://dx.doi.org/10.1016/j.jbankfin.2015.11.011

ISSN

0378-4266

Language

en