publication . Article . Other literature type . 2019

Liquidity-adjusted CAPM — An empirical analysis on Indian stock market

Gaurav Kumar; Arun Kumar Misra; David McMillan;
Open Access English
  • Published: 29 Jan 2019 Journal: Cogent Economics & Finance (issn: 2332-2039, Copyright policy)
  • Publisher: Taylor & Francis Group
Abstract
AbstractThis article examines the impact of various sources of systematic liquidity risk and idiosyncratic liquidity risk on expected returns in the Indian stock market. The study tested the liquidity-adjusted capital asset pricing model (LCAPM) which is previously tested on developed markets. Systematic liquidity risk is found to be significant in impacting asset returns through various channels, viz. commonality in liquidity and illiquidity sensitivity to market returns. Covariance between individual stock returns and associated stock liquidity has a commanding influence as an idiosyncratic liquidity risk factor. The estimated asset pricing model is found to b...
Subjects
free text keywords: illiquidity, liquidity risk, nse, emerging market, liquidity-adjusted capm, Finance, HG1-9999, Economic theory. Demography, HB1-3840
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