The Pricing Discount for Limited Liquidity: Evidence from SWX Swiss Exchange and the Nasdaq

Loderer, Claudio; Roth, Lukas (2005). The Pricing Discount for Limited Liquidity: Evidence from SWX Swiss Exchange and the Nasdaq. Journal of Empirical Finance, 12(2), pp. 239-268. Elsevier

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We investigate the pricing discount for limited liquidity. Unlike previous studies that have examined the relation between histroical returns and liquidity, ours looks directly at current stock prices. This approach requires less data and yields up-to-date information about limited liquidity discounts. We analyze data from the Swiss exchange and the Nasdaq during 1995-2001, and find a statistically and economically significant price-liquidity relation in both markets. We test the robustness of that relation with a procedure that does not rely on specific distributional assumptions. Our findings are unaffected. Accordingly, the discount suffered by the least liquid securities is about 30%.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Financial Management

UniBE Contributor:

Loderer, Claudio and Roth, Lukas

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0927-5398

Publisher:

Elsevier

Language:

English

Submitter:

Karin Dolder

Date Deposited:

09 Dec 2013 16:00

Last Modified:

25 Dec 2014 01:13

BORIS DOI:

10.7892/boris.39513

URI:

https://boris.unibe.ch/id/eprint/39513

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