This paper shows that over time, expected market illiquidity positively affects ex ante stock
excess return, suggesting that expected stock excess return partly represents an illiquidity …

The effects of asset liquidity on expected returns for assets with infinite maturities (stocks) are
examined for bonds (Treasury notes and bills with matched maturities of less than 6 months…

This paper studies the effect of the bid-ask spread on asset pricing. We analyze a model in
which investors with different expected holding periods trade assets with different relative …

We propose that fund performance can be predicted by its R 2 , obtained from a regression
of its returns on a multifactor benchmark model. Lower R 2 indicates greater selectivity, and it …

We review the theories on how liquidity affects the required returns of capital assets and the
empirical studies that test these theories. The theory predicts that both the level of liquidity …

The higher taxation of dividends in the United States gave rise to theories that explain why
companies pay dividends. Tax‐based signaling models propose that the higher tax on …

A conglomerate merger generally leads, through the diversification effect, to reduced risk for
the combined entity. As is well known, in perfect capital markets such risk reduction will not …

This study considers the problem of a price-setting monopolistic market-maker in a
dealership market where the stochastic demand and supply are depicted by price-dependent …

This paper examines the effects of the mechanism by which securities are traded on their
price behavior. We compare the behavior of open‐to‐open and close‐to‐close returns on …

Merton's [26] recent extension of the CAPM proposed that asset returns are an increasing
function of their beta risk, residual risk, and size and a decreasing function of the public …