As the demand for liquidity risk management has increased, the importance of comprehensive liquidity assessments of exchanges has been highlighted. This thesis investigates the liquidity on the Nasdaq OMX Stockholm exchange by using daily end of day data. The transaction cost is evaluated using the Holden model and the price impact from trading is evaluated using the Illiq model. Considering the three segments; small cap, mid cap, and large cap, the results suggest that both the transaction cost and price impact is highest for small cap stocks and lowest for large cap stocks. It is also shown that the transaction cost has decreased between 2002-03-20 and 2012-01-06 for all three segments although the cost is increasing for the small cap segment again. No decrease in price impact over this time period could be found. The data behind the results has then been used to create a combined liquidity measure with the purpose of indicating the liquidity condition of a mutual fund. The combined measure can also be used to assess whether it is price impact or transaction cost that contributes most to the liquidity cost when liquidating stocks or reveal what stocks in a portfolio that are the most illiquid. It is hence suggested as a tool for assessing large portfolios.

Yes / This paper examines a new channel through which dividend policy can affect firm value. We find that firms that pay dividends exhibit lower systematic liquidity risk than those that do not. We also report a significant negative relationship between dividend payment and systematic liquidity risk. The liquidity improvement associated with dividend payments translates into an economically meaningful reduction in the cost of equity capital. Our results are robust to endogeneity concerns, to alternative measures of liquidity risk and dividend payouts, and to alternative model specifications. Further analysis suggests that the reduction in liquidity risk associated with dividend payouts is more pronounced for weakly governed firms and firms with opaque informational environment. Finally, we find that the recent financial crisis led to a greater increase in systematic liquidity risk for firms with no or low dividend payouts. Overall, our study implies that dividend policy can be used by corporate managers to shape liquidity risk and mitigate the adverse impact of economic downturns on the value of their firms.

Magistro baigiamajame darbe išanalizuota ir įvertinta Lietuvos kredito įstaigų likvidumo rizikos vadybos tobulinimo galimybė. Pateikti siūlymai kaip patobulinti bankų aktyvų ir pasyvų valdymo sistemos efektyvumą. Pirmoje darbo dalyje teoriniu aspektu tiriamas bankų rizikos turinys, pateikiama bankų rizikos esmė bei klasifikavimo galimybės. Antroje dalyje nagrinėjamos aktyvų ir pasyvų strategijos, teorijos bei metodai. Trečioje dalyje analizuojamos ir vertinamos Lietuvos komercinių bankų veiklos bei likvidumo rizikos rodikliai, pokyčių tendencijos. / In Master‘ s Work is analysed and evaluated opportunity and effectiveness an of development liquidity of management in Lithuanian Banks of. There are provided to the possibilities to improve activity of bank. In the first part of this work we’ve provided conception of risk management and different risk classification models. In the second part of this work there are consideratios strategy, theories and methods of assets and liabilities. In the third part of work analyse and there is an evaluation at liquidity risk rates of Lithuanian commercial banks, also tendency of changes.

本文以1997年6月至2016年7月臺灣上櫃股票市場做為研究樣本，透過建立一Bivariate Diagonal BEKK GARCH (1,1)-in-mean模型，並以大盤週轉率形成之總合流動性指標與大盤超額報酬率之共變異數做為系統流動性風險之衡量指標，觀察系統流動性風險在臺灣上櫃股票市場是否有被訂價。結論除發現系統流動性風險有確實被訂價外，系統流動性風險溢價還兼具穩定性，且對市場超額報酬率有顯著的影響力。 / By constructing a bivariate diagonal BEKK Garch (1,1)-in-mean model and using the covariance between the excess market return and turnover rate as aggregate systematic liquidity proxy, the study tries to examine whether systematic liquidity risk was priced on Taiwan OTC stock market during the period of June 1997-July 2016. Based on monthly data, the findings suggest that not only the systematic liquidity risk was well priced on Taiwan OTC stock market, but the phenomenon also possessed stability and could have significant impact on stock returns.

This dissertation addresses issues concerning liquidity and its volatility. It consists of two essays. The first essay, "Liquidity, Macro Factors and the U.S. Equity Flows to Emerging Markets", examines the role of liquidity on equity flows from the U.S. to fifteen emerging markets around the world. Since liquidity has many dimensions, an emphasis is placed on utilizing various measures of liquidity. Moreover, both static and dynamic analyses, as well as short and long-horizon regressions, are performed to investigate the research questions. The results suggest that a liquid market attracts flows, after controlling for market size, political openness, exchange rate and other macro factors. Additionally, evidence indicates that the importance of liquidity varies across regions. For instance in the Asian region, the relation between equity flows and volume-related liquidity is weak while that between flows and price impacts of trading is strong. Evidence also supports the relevance of macro factors such as a country's economic freedom. The second essay, "Liquidity Risk Premium Puzzle and Possible Explanations", attempts to resolve the liquidity risk puzzle: a negative relation between returns and liquidity risk, documented by Chordia, Subrahmanyam, and Anshuman (2001b), by employing alternative liquidity measures and by incorporating factors that might potentially affect the relation. The main findings are as follows. The relation between stock returns and volatility of liquidity depends on the measure of liquidity. When liquidity measures are based on trading volume, the results are largely mixed, but when liquidity is measured based on price impact of trading, the relation between returns and volatility of price impacts is positive, as expected. The results are sensitive to time periods examined. Moreover, during extreme down markets, the aversion to liquidity volatility is lower, suggesting behavioral bias might potentially address the puzzle. Empirical findings also suggest that liquidity risk premium tends to be greater for small stocks. Finally, when the VIX index is included as a proxy for investor sentiment, the results indicate that the relation between returns and liquidity risk is significantly positive in four out of five liquidity measures. In sum, the empirical analysis partially but not completely addresses the puzzle.

This project focuses on risk analysis of corporate bond portfolios. We separate the total risk of the portfolio into three parts, which are market risk, credit risk and liquidity risk. The market risk component is quantified by value-at-risk (VaR) determined by change in yield to maturity of the bond portfolio. For the credit risk component, we calculate default probabilities and losses in the event of default and then compute credit VaR. Next, we define a factor called basis which is the difference between the Credit Default Swap (CDS) spread and its corresponding corporate bond yield spread (z-spread or OAS). We quantify the liquidity risk by using the basis. In addition, we also introduce a Fama-French multi-factor model to analyze factor significance to the corporate bond portfolio.

This project focuses on risk analysis of corporate bond portfolios. We divide the total risk of the portfolio into three parts, which are market risk, credit risk and liquidity risk. The market risk component is quantified by value-at-risk (VaR) which is determined by change in yield to maturity of the bond portfolio. For the credit risk component, we calculate default probabilities and losses in the event of default and then compute credit VaR. Next, we define a factor called `basis' which is the difference between the Credit Default Swap (CDS) spread and its corresponding corporate bond yield spread (z-spread or OAS). We quantify the liquidity risk by using the basis. In addition we also introduce a Fama-French multi-factor model to analyze the factor significance to the corporate bond portfolio.

Liquidity risk is a large issue faced by mutual funds. Large funds typically trade in size, and these large sizes often have a significant impact on prices. My hypothesis is that large funds will not invest in illiquid assets as much as smaller funds due to the price sensitivity of illiquid assets. While this seems obvious, the results from this study are not in agreement with this hypothesis. My paper finds that as the illiquidity of a stock increases, so does the probability that a large fund invests in the stock.

In the first essay, I create a hedge fund informed trading measure (ITM) that separates information related trades from liquidity driven trades. The results indicate that ITM predicts future stock returns at the trade level, thus is associated with information. By aggregating the most informed trades at the stock level, I find that stocks heavily purchased by informed hedge funds earn a significant alpha. The results indicate that the ITM performs better than some previously documented measures and is robust to two different versions of the measure. The second essay exploits the expiring nature of hedge fund lockups to create a new, within-fund proxy of funding liquidity risk. When funds have lower funding liquidity risk, risk-adjusted performance improves and exposure to tail risk increases. We use fund fixed-effect, a placebo approach, and a regression discontinuity design to establish a link between funding liquidity risk and the ability of funds to capitalize on risky mispricing. The third essay explores hedge fund managers ability to identify and trade on stock mispricing opportunity. We refer to the amount of capital that are is locked up and refrained from redemption as the stable capital, and study how it affects stock mispricing. We find that when funds have more lockup capital, they are more likely to take mispricing risks. Taking all funds together, more stable capital in the industry is driving the reduction or even correction of market-wide stock mispricing. Underpriced stocks benefit more than overpriced stock from hedge funds stable capital.

<p>The main objective of this paper is to prove that liquidity costs do exist in option pricingtheory. To achieve this goal, a martingale approach to option pricing theory is usedand, from a model by Jarrow and Protter [JP], a sound theoretical model is derived toshow that liquidity risk exists. This model, derived and tested in this extended theory,allows for liquidity costs to arise. The expression liquidity cost is used in this paper tomeasure liquidity risk relative to the option price.</p>