2010•International Journal of Banking Accounting and FinanceRequires access

Systematic liquidity risk and asset pricing: evidence from London Stock Exchange

Khelifa Mazouz, Dima Waleed Hanna Alrabadi, Mark Freeman, Shuxing Yin

Abstract

This study examines whether systematic liquidity risk is priced on the London Stock Exchange (LSE). We use the proportional quoted bid-ask spread, Amihud's (2002) market illiquidity ratio, and turnover rate as liquidity proxies. In contrast to the US studies, we do not find evidence that systematic liquidity risk is priced on the LSE.

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Key concepts: Market liquidity, Liquidity risk, Stock exchange, Capital asset pricing model, Market maker, Systematic risk, Financial economics, Economics