The role of illiquidity risk factor in asset pricing models: Malaysian evidence

This paper examines the role of illiquidity risk factor in asset Pricing through two variants of liquidity-based three-factor models, referred as SiLiq and DiLiq, which are developed in the context of Fama-French model. The sample comprises 230 to 480 firms which stocks are listed on Bursa Malaysia...

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Main Authors:	Ruzita Abdul Rahim, Abu Hassan Shhari Mohd. Nor
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2007
Online Access:	http://journalarticle.ukm.my/8075/ http://journalarticle.ukm.my/8075/ http://journalarticle.ukm.my/8075/1/834-1591-1-SM.pdf

id	ukm-8075
recordtype	eprints
spelling	ukm-80752016-12-14T06:46:07Z http://journalarticle.ukm.my/8075/ The role of illiquidity risk factor in asset pricing models: Malaysian evidence Ruzita Abdul Rahim, Abu Hassan Shhari Mohd. Nor, This paper examines the role of illiquidity risk factor in asset Pricing through two variants of liquidity-based three-factor models, referred as SiLiq and DiLiq, which are developed in the context of Fama-French model. The sample comprises 230 to 480 firms which stocks are listed on Bursa Malaysia over the period of January 1987 to December 2004. To proxy for liquidity, this study tests six alternative measures based on trading volume variables, namely dollar volume (DVOL), share turnover (TURN), Illiquidity (ILLIQ), and the coefficient of variations of each of these variables (CVDVOL" cVrURN" and cVILLIQ. The preliminary results indicate that the illiquidity risk factors (L M H) that are formed from TURN consistently outperform the other alternatives as they explain as high as 36 percent variations in stock returns. The results of multiple time series regressions lend strong support for the hypothesis that illiquidity risk are priced, particularly when is LMH incorporated in DiLiq. Penerbit Universiti Kebangsaan Malaysia 2007 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/8075/1/834-1591-1-SM.pdf Ruzita Abdul Rahim, and Abu Hassan Shhari Mohd. Nor, (2007) The role of illiquidity risk factor in asset pricing models: Malaysian evidence. Jurnal Pengurusan, 26 . pp. 67-97. ISSN 0127-2713 http://ejournal.ukm.my/pengurusan/index
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	This paper examines the role of illiquidity risk factor in asset Pricing through two variants of liquidity-based three-factor models, referred as SiLiq and DiLiq, which are developed in the context of Fama-French model. The sample comprises 230 to 480 firms which stocks are listed on Bursa Malaysia over the period of January 1987 to December 2004. To proxy for liquidity, this study tests six alternative measures based on trading volume variables, namely dollar volume (DVOL), share turnover (TURN), Illiquidity (ILLIQ), and the coefficient of variations of each of these variables (CVDVOL" cVrURN" and cVILLIQ. The preliminary results indicate that the illiquidity risk factors (L M H) that are formed from TURN consistently outperform the other alternatives as they explain as high as 36 percent variations in stock returns. The results of multiple time series regressions lend strong support for the hypothesis that illiquidity risk are priced, particularly when is LMH incorporated in DiLiq.
format	Article
author	Ruzita Abdul Rahim, Abu Hassan Shhari Mohd. Nor,
spellingShingle	Ruzita Abdul Rahim, Abu Hassan Shhari Mohd. Nor, The role of illiquidity risk factor in asset pricing models: Malaysian evidence
author_facet	Ruzita Abdul Rahim, Abu Hassan Shhari Mohd. Nor,
author_sort	Ruzita Abdul Rahim,
title	The role of illiquidity risk factor in asset pricing models: Malaysian evidence
title_short	The role of illiquidity risk factor in asset pricing models: Malaysian evidence
title_full	The role of illiquidity risk factor in asset pricing models: Malaysian evidence
title_fullStr	The role of illiquidity risk factor in asset pricing models: Malaysian evidence
title_full_unstemmed	The role of illiquidity risk factor in asset pricing models: Malaysian evidence
title_sort	role of illiquidity risk factor in asset pricing models: malaysian evidence
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2007
url	http://journalarticle.ukm.my/8075/ http://journalarticle.ukm.my/8075/ http://journalarticle.ukm.my/8075/1/834-1591-1-SM.pdf
first_indexed	2023-09-18T19:51:25Z
last_indexed	2023-09-18T19:51:25Z
_version_	1777406244541169664

The role of illiquidity risk factor in asset pricing models: Malaysian evidence

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