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Stock Resiliency as an Illiquidity Measure and Return Factor

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Summary

The document summarizes research on stock resiliency, labeled RES, as an expanded measure of liquidity. The cited study examines whether stocks with greater illiquidity earn a return premium, using resiliency as an additional measure alongside conventional liquidity indicators. The summary reports that the premium remains statistically significant after controlling for other liquidity measures and factors associated with stock returns.

It also describes tests addressing whether information shocks or information asymmetry explain the relationship. The reported premium persists after controls for these effects and is especially pronounced when trading volume is high. The evidence comes from historical U.S. market data and is presented through a secondary summary rather than detailed methods or numerical results. Its authors caution that findings may not hold under different market conditions, so the measure and premium require validation across markets and periods.

Key ideas

  • The cited study proposes RES, a stock-resiliency measure that extends conventional views of liquidity.
  • The summary reports an illiquidity premium after controlling for other liquidity measures and return-related factors.
  • The reported premium persists after accounting for information shocks and information asymmetry.
  • The premium is described as stronger when trading volume is high.
  • The evidence uses historical U.S. data and may not generalize to different market conditions.

Tags

EquitiesMarket microstructureStatisticsFactor investing

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.