Trade-Time Measures of Liquidity

摘要: Traditional measures of stock liquidity have become noisier following dramatic changes in provision post decimalization. We develop stock-specific that control for short-term variations supply and trading activity. Our trade-time based capture per-dollar price impacts fixed-dollar positions. outperform standard including bid-ask spreads, effective estimates Kyle's λ, Amihud's (2002) measure, especially recent years. Post-decimalization, expected costs still explain the cross-section returns NYSE-listed stocks: we obtain monthly premium 5.3bp 2.4bp risk-adjusted returns. Moreover, estimated premia rise after implementation Reg-NMS.