قیمت جهانی ریسک نقدینگی

This paper empirically tests the liquidity-adjusted capital asset pricing model of Acharya and Pedersen (2005) on a global level. Consistent with the model, I find evidence that liquidity risks are priced independently of market risk in international financial markets. That is, a security’s required rate of return depends on the covariance of its own liquidity with aggregate local market liquidity, as well as the covariance of its own liquidity with local and global market returns. I also show that the US market is an important driving force of global liquidity risk. Furthermore, I find that the pricing of liquidity risk varies across countries according to geographic, economic, and political environments. The findings show that the systematic dimension of liquidity provides implications for international portfolio diversification.

Liquidity has been shown to affect the cross-sectional differences of asset returns in the US market through two different channels, that is, as either a characteristic (Amihud and Mendelson, 1986, Brennan and Subrahmanyam, 1996 and Amihud, 2002) or a risk factor (Pástor and Stambaugh, 2003, Acharya and Pedersen, 2005, Liu, 2006, Sadka, 2006 and Watanabe and Watanabe, 2008). Encompassing multiple channels through which liquidity affects asset prices, Acharya and Pedersen (2005) propose the liquidity-adjusted capital asset pricing model (LCAPM), which incorporates three different types of liquidity risk that are independent of traditional market risk: the covariance of liquidity with market liquidity (commonality in liquidity), the covariance of liquidity with market return, and the covariance of return with market liquidity. In their paper, Acharya and Pedersen (2005) also show empirical evidence supporting the LCAPM in the US market. However, to date, the potential importance of liquidity has not been explored as extensively in international financial markets as it has in the US market. In the study of world market liquidity, earlier research has primarily focused on liquidity level (Rouwenhorst, 1999, Brockman and Chung, 2003, Chiyachantana et al., 2004, Lesmond, 2005 and Eleswarapu and Venkataraman, 2006), while researchers have recently paid more attention to the systematic aspects of liquidity (Liang and Wei, 2006, Bekaert et al., 2007, Brockman et al., 2009 and Karolyi et al., 2009). Brockman, Chung, and Pérignon (2009) and Karolyi, Lee, and van Dijk (2009) investigate the commonality in liquidity in global financial markets. Liang and Wei (2006) examine the pricing of liquidity risk that arises from the sensitivity of stock returns to market-wide liquidity in 23 developed-market countries. However, the pricing of multiple liquidity risks in a unified framework such as the LCAPM has not been fully investigated for international financial markets. Recently, Bekaert, Harvey, and Lundblad (2007) investigate various forms of liquidity risk, but at the level of country portfolios, not individual stocks. Moreover, they restrict the sample to 19 emerging-market countries, leaving the importance of liquidity in asset pricing in developed markets for future research. I contribute to the literature by empirically investigating an equilibrium asset pricing relation with liquidity both as a characteristic and as a risk factor in international financial markets by using 30 thousand stocks from 50 countries from January 1988 to December 2007. To my knowledge, this is the first paper that assesses multiple forms of liquidity risk as well as market risk, as specified in the LCAPM, in global financial markets. I evaluate the unconditional version of the LCAPM on a global level under different assumptions on the degree of world financial market integration. I specifically investigate the following research questions in this paper. First, I examine whether supporting evidence of the LCAPM in the US is also prevalent in global financial markets. In particular, I investigate whether liquidity risks are priced independently of market risk and examine which type of liquidity risk is most significant in pricing. I employ a cross-sectional regression framework and factor model regressions to investigate this issue. Second, I examine whether the US market plays an important role in the pricing of global liquidity risk. To achieve this goal, I compare the pricing of liquidity risk with respect to US factors with the pricing of liquidity risk with respect to global aggregates that are independent of both local and US factors. Third, I investigate the differences in the relative importance of local and global liquidity risk in asset pricing and further examine the sources of such differences according to geographic, economic, and political environments across countries. An extension to global markets of the investigation of the pricing of liquidity risks is important for at least the following three reasons. First, the importance of liquidity could be more pronounced in markets other than the US, where liquidity is allegedly high. Hence, extending the study of liquidity to world markets could provide a good opportunity to evaluate the role of liquidity as an additional source of systematic risk. Second, liquidity could be a global phenomenon as can be seen from episodes such as the Asian financial crisis, the meltdown of Long-Term Capital Management, and the ongoing subprime mortgage crisis. As shown by these incidents, liquidity-related events are not restricted to either developed-market or emerging-market countries, but they are pervasive worldwide, making it necessary to investigate both developed and emerging markets together when studying liquidity in global markets. Third, the geographic, economic, and political environment could affect the importance of liquidity risk differently across countries. Extending the scope to global markets provides a unique opportunity to investigate such cross-country or cross-regional variations in the pricing of liquidity risk. I find that market liquidity is persistent in most of the sample countries, consistent with US results in the literature (Pástor and Stambaugh, 2003, Acharya and Pedersen, 2005 and Korajczyk and Sadka, 2008). In addition to this confirmatory evidence, I find some new and interesting results. First, consistent with the LCAPM, I find supporting evidence that liquidity risks are priced factors, independent of market risk, in international financial markets. Specifically, cross-sectional regressions show that, after controlling for market risk, liquidity level, size, and book-to-market, a security’s required rate of return depends on the following two covariances: the covariance of its own liquidity with the liquidity aggregated at the local market, and the covariance of its own liquidity with local and global market returns. Factor model regressions show that trading based on local liquidity risk produces 7.6% annual excess returns (trading alpha) in the overall world market and 13.6% in emerging markets. The corresponding figure is 1.8% in the overall world market when trading is based on global liquidity risk. Second, I provide evidence that the global liquidity risk arising from the covariance of individual stock liquidity with US market return is priced. This highlights the key role of the US in global financial markets, contrasting sharply with the finding that the global liquidity risk formed by excluding the US is not priced or is priced with the wrong sign. Third, the pattern of the pricing of liquidity risk varies across geographic, political, and economic environments. On the one hand, global liquidity risk is shown to be more important than local liquidity risk in countries that are more open, that is, in developed countries as well as in countries with high transparency, low political risk, and large cross-border portfolio holdings. On the other hand, in countries with the contrary properties, i.e., where global investors are rare, I find that local liquidity risk is more important than global liquidity risk. The findings of this paper have important implications for international investment and portfolio diversification. In the traditional capital asset pricing model, any systematic fluctuation of asset prices is captured solely by market risk. Therefore, the covariance of stock returns with (global) market returns is the key to the success of (international) portfolio diversification. However, the findings in this paper show that the commonality in liquidity and the covariance of liquidity with market returns are channels, independent of market risk, through which liquidity systematically affects asset prices. Hence, the findings provide an additional layer to consider when investors seek to diversify away risks in global financial markets. In this regard, theoretical models of the liquidity constraints of financial intermediaries shed some light on the importance of the findings in this paper in that they share the common feature of the increasing importance of liquidity as arbitrageurs are forced to liquidate their positions in the face of large market declines (Kyle and Xiong, 2001, Morris and Shin, 2004 and Brunnermeier and Pedersen, 2009). This implies that liquidity risk is a relevant factor in asset pricing because arbitrageurs could demand compensation for bearing liquidity risk. The importance of liquidity risk is cited not only in the academic literature but also in the financial press: “Whenever the market turns against you, you take the biggest losses in illiquid securities,” says Richard Bookstaber, former head of risk management at Salomon Bros. “Because there are so few buyers, you’re forced to sell at a discount that is both huge and highly unpredictable” (p. 49, Fortune, November 26, 2007). The significant pricing of global liquidity risk in developed counties and in countries with low information asymmetry, low political risk, and large cross-border holdings implies the importance of global investors and the relatively high degree of financial market integration in such countries. Supporting this view, Chan, Covrig, and Ng (2005) show that countries with these properties attract more global investors. The finding reveals that stocks whose liquidity improves in market downturns are valued by global investors because liquidity is an important concern, especially when investors rebalance their portfolios globally in the face of down markets. One challenge in a study of liquidity at the global level is finding a suitable proxy for liquidity. In international financial markets, intra-day data are seldom available and trading volume data, upon which other popular proxies such as that of Amihud (2002) and turnovers are based, are also rare with the quality not being guaranteed. In addition, these data do not cover a sufficiently long period for many countries. Hence, it might be most appropriate to use a liquidity proxy that is based solely on returns. I employ the zero-return proportion measure, suggested by Lesmond, Ogden, and Trzcinka (1999), which is the ratio of the number of zero-return days to the total number of trading days in a given month. The economic intuition behind this measure is that informed traders will not trade on a given day, thus leading to a zero-return day, when the trading cost is high enough to offset the gains from informed trading. The zero-return proportion measure has been widely employed in the literature. It is used to evaluate the impact of trading costs in a momentum strategy (Lesmond, Schill, and Zhou, 2004), to examine the relation between market liquidity and political risks in emerging markets (Lesmond, 2005), and to investigate the implications of liquidity for asset pricing in emerging markets (Bekaert, Harvey, and Lundblad, 2007). The validity of this measure has been established both in the US market (Lesmond et al., 1999 and Goyenko et al., 2009) and in world financial markets (Lesmond, 2005 and Bekaert et al., 2007). The rest of the paper is organized as follows. In the next section, I briefly introduce the LCAPM of Acharya and Pedersen (2005). Section 3 describes the data and the sample construction procedure. Section 4 explains the methodology. Empirical evidence on the pricing of local and global liquidity risk as well as robustness tests are presented in Section 5. Section 6 demonstrates how the pricing of liquidity risk varies across countries with different geographic, economic, and political environments. Section 7 presents empirical results based on factor model regressions. I conclude in Section 8.

This paper empirically investigates an equilibrium asset pricing relation with liquidity, as specified in the LCAPM of Acharya and Pedersen (2005) , using a large sample of assets covering 30,000 stocks from 50 countries around the world for the period of 1988–2007The empirical evidence presented in this paper is supportive of the LCAPM in that liquidity risks are priced independently of market risk in international financial markets, even after controlling for liquidity level, size, and book-to-market. Specifically, it is shown that a security’s required return depends on the covariance of its own liquidity with the aggregate local market liquidity, as well as on the covariance of its own liquidity with local and global market returns. These findings imply that liquidity is an important concern when investors rebalance their portfolios in the face of down markets or illiquidmarkets. Therefore, the findings have implications for international portfolio diversification, because liquidity risk is another dimension to consider in addition to traditional market risk.By providing evidence that expected returns of stocks from around the world are affected by the covariance of liquidity with US market returns, I also show that the US market is a driving force of global liquidity risk.