Evaluating Systematic Liquidity Estimators
2010 (English)In: 2010 FMA Annual Meeting – Academic Paper Sessions, 2010Conference paper (Other academic)
Empirical work investigating commonality in liquidity and systematic liquidity risk utilizes various different estimators of systematic liquidity. This paper is the first to compare and contrast such estimators. We distinguish two classes of systematic liquidity estimators that both have many followers in the literature: (1) weighted average estimators based on concurrent liquidity shocks and (2) principal components estimators based on both concurrent and past liquidity shocks. Our results show that the simpler weighted average estimators perform at least as well as the more complex principal components estimators. This finding is robust across different evaluation criteria and different underlying liquidity measures.
Place, publisher, year, edition, pages
Research subject Business Administration
IdentifiersURN: urn:nbn:se:su:diva-43259OAI: oai:DiVA.org:su-43259DiVA: diva2:355093
Financial Management Association annual meeting 2010