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Market Liquidity
Asset Pricing, Risk, and Crises


Yakov Amihud, Haim Mendelson, Lasse Heje Pedersen, Beni Lauterbach, Viral V. Acharya, Markus Brunnermeier, Robert A. Wood, Mark Mitchell, Todd Pulvino
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  • Date Published: November 2012
  • availability: In stock
  • format: Paperback
  • isbn: 9780521139656


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About the Authors
  • This book presents the theory and evidence on the effect of market liquidity and liquidity risk on asset prices and on overall securities market performance. Illiquidity means incurring a high transaction cost, which includes a large price impact when trading and facing a long time to unload a large position. Liquidity risk is higher if a security becomes more illiquid when it needs to be traded in the future, which will raise trading cost. The book shows that higher illiquidity and greater liquidity risk reduce securities prices and raise the expected return that investors require as compensation. Aggregate market liquidity is linked to funding liquidity, which affects the provision of liquidity services. When these become constrained, there is a liquidity crisis which leads to downward price and liquidity spiral. Overall, the volume demonstrates the important role of liquidity in asset pricing.

    • Internationally renowned financial professors show the importance of liquidity in determining securities prices and returns
    • Highlights the role of liquidity risk in the recent financial crisis
    • Explains how investors can benefit from understanding the effects of liquidity and liquidity risk
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    Product details

    • Date Published: November 2012
    • format: Paperback
    • isbn: 9780521139656
    • length: 289 pages
    • dimensions: 228 x 152 x 15 mm
    • weight: 0.4kg
    • contains: 32 b/w illus. 27 tables
    • availability: In stock
  • Table of Contents

    Introduction Yakov Amihud, Haim Mendelson and Lasse Heje Pedersen
    Part I. Liquidity: The Effect of Trading Costs on Securities Prices and Returns:
    1. Asset pricing and the bid-ask spread Yakov Amihud and Haim Mendelson
    2. Liquidity, maturity, and the yield on US Treasury securities Yakov Amihud and Haim Mendelson
    3. Market microstructure and securities values: evidence from the Tel Aviv stock exchange Yakov Amihud, Haim Mendelson and Beni Lauterbach
    Part II. Liquidity Risk:
    4. Illiquidity and stock returns: cross-section and time-series effects Yakov Amihud
    5. Asset pricing with liquidity risk Viral V. Acharya and Lasse Heje Pedersen
    Part III. Liquidity Crises:
    6. Market liquidity and funding liquidity Markus Brunnermeier and Lasse Heje Pedersen
    7. Liquidity and the 1987 stock market crash Yakov Amihud, Haim Mendelson and Robert A. Wood
    8. Slow moving capital Mark Mitchell, Lasse Heje Pedersen and Todd Pulvino.

  • Authors

    Yakov Amihud, Stern School of Business, New York University

    Haim Mendelson, Graduate School of Business, Stanford University

    Lasse Heje Pedersen, Stern School of Business, New York University


    Yakov Amihud, Haim Mendelson, Lasse Heje Pedersen, Beni Lauterbach, Viral V. Acharya, Markus Brunnermeier, Robert A. Wood, Mark Mitchell, Todd Pulvino

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