This paper explains and extends my 2002 paper. It presents a return factor of illiquid-minus-liquid stocks, called IML, which provides a time series of the illiquidity premium. The risk-adjusted predicted return on IML is lower in the period that follows my 2002 paper but it is still...

This book is about the pricing of liquidity. We present theory and evidence on how liquidity affects securities prices, why liquidity varies over time, how a drop in liquidity leads to a drop in prices, and why liquidity crises create liquidity spirals. The analysis has implications for traders,...

Cover -- MARKET LIQUIDITY -- Title -- Copyright -- Contents -- Acknowledgments -- Introduction and Overview of the Book -- PART I: THE EFFECT OF LIQUIDITY COSTS ON SECURITIES PRICES AND RETURNS -- Introduction and Overview -- CHAPTER 1 Asset Pricing and the Bid-Ask Spread -- Summary and...