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A Study on the Time-Series Characteristics of Liquidity in Asset Pricing

Author(s)

Kehao Chen

Affiliation(s)

Jinan Xinhang Experimental Foreign Language School, China

Abstract

This study aims to explore the impact of liquidity time series characteristics on asset pricing. Daily trading data from a large stock market is used to focus on the performance of spreads and Amihud liquidity indicators in time series and their relationship with asset prices. Through empirical tests, it is found that liquidity indicators show obvious seasonal fluctuations and trend changes in time series, especially when the market is hit by major events, liquidity decreases significantly. Regression analysis results show that higher spreads and Amihud liquidity indicators are significantly correlated with lower asset returns, and this relationship is particularly significant in bear markets, indicating that insufficient liquidity has a negative impact on asset prices. The results support the importance of liquidity as a key factor in asset pricing and emphasize that the dynamic changes of liquidity should be fully considered when evaluating asset prices to more accurately reflect market risks.

Keywords

Liquidity; Asset Pricing; Time Series Analysis; Empirical Tests; Financial Markets

References

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