Open issues in testing liquidity in frontier financial markets: the case of Serbia

Minović, Jelena and Živković, Boško (2010) Open issues in testing liquidity in frontier financial markets: the case of Serbia. Ekonomski anali, 55 (185). pp. 33-62. ISSN 0013-3264

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Abstract

This paper examines the impact of illiquidity and liquidity risk on expected asset returns in the Serbian stock market. For this market we estimate the conditional Liquidity-adjusted Capital Asset Pricing Model (LCAPM) of Acharya and Pedersen (2005). We use daily data for the period from 2005-2009. While the method developed is applicable in other markets this is the first paper that tests the LCAPM model in the case of Serbia. Liquidity risks are allowed to be timevarying. We find that for the Serbian market as a frontier market illiquidity and liquidity risk significantly impact price formation. For such a market the LCAPM may indeed be a good tool for realistic assessment of the expected asset returns.

Item Type: Article
Additional Information: COBISS.ID=1024411280
Uncontrolled Keywords: frontier market, conditional liquidity-adjusted CAPM, illiquidity, liquidity risk
Subjects: H Social Sciences > H Social Sciences (General)
Depositing User: Jelena Banovic
Date Deposited: 22 Sep 2016 18:25
Last Modified: 22 Sep 2016 18:25
URI: http://ebooks.ien.bg.ac.rs/id/eprint/700

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