Market liquidity is the ease of trading an asset. Its risk is the potential loss, because a security can only be traded at high or prohibitive costs. While the omnipresence and importance of market liquidity is widely acknowledged, it has long remained a more or less elusive concept. Treatment...

We propose a novel Bayesian model combination approach where the combination weights depend on the past forecasting performance of the individual models entering the combination through a utility-based objective function. We use this approach in the context of stock return predictability and...

This paper estimates a conditional version of the liquidity adjusted CAPM by Acharya and Pedersen (2005) using NYSE and AMEX data from 1927 to 2010 to study the illiquidity premium and its variation over time. The components of the illiquidity premium is in this model derived as the level of...

This paper disentangles the complexity of the distress risk premium in stock returns using the risk-neutral measure of credit risk (valued by CDS spread) and investigates the relationship between credit risk and the market , size, value, and momentum effects. Consistent with the argument for a...

We find that price and earnings momentum are pervasive features of international equitymarkets when controlling for data snooping biases. For European countries, we find that pricemomentum is subsumed by earnings momentum on an aggregate level. However, this rationaledoes not apply to each and...

Economic cycles are the key credit portfolio risk driver and they are autocorrelated over time. We then show that it is economically meaningful to define risk for credit portfolios in a multi period setup. Since one period expected shortfall fails to measure risk adequately in a multi period...

Market liquidity risk, the difficulty or cost of trading assets in crises, has been recognized as an important factor in risk management. Literature has already proposed several models to include liquidity risk in the standard Value-at-Risk framework. While theoretical comparisons between those...

It has been frequently discussed, that returns are not normally distributed. Liquidity costs, measuring market liquidity, are similarly non-normally distributed displaying fat tails and skewness. Liquidity risk models either ignore this fact or use the historical distribution to empirically...

Market liquidity is the ease of trading an asset. Its risk is the potential loss, because a security can only be traded at high or prohibitive costs. While the omnipresence and importance of market liquidity is widely acknowledged, it has long remained a more or less elusive concept. Treatment...

Market liquidity risk, the difficulty or cost of trading assets in crises, has been recognized as an important factor in risk management. Literature has already proposed several models to include liquidity risk in the standard Value-at-Risk framework. While theoretical comparisons between those...