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Revisiting Pastor–Stambaugh liquidity factor

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  • Momani, Mohammad Q.M.

Abstract

The objective of this study is to examine the Pastor and Stambaugh (2003) liquidity-augmented four-factor asset pricing model to revisit whether the liquidity factor is indeed priced in the U.S. equity market, over the period from January 1966 through December 1999. The study applies the state-of-the-art two-pass cross-sectional regression methodology of Lewellen et al. (2010). I find the liquidity factor is not priced. The result is robust using an extended sample that ends in December 2016.

Suggested Citation

  • Momani, Mohammad Q.M., 2018. "Revisiting Pastor–Stambaugh liquidity factor," Economics Letters, Elsevier, vol. 163(C), pages 190-192.
    • Handle: RePEc:eee:ecolet:v:163:y:2018:i:c:p:190-192
    DOI: 10.1016/j.econlet.2017.12.031
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    References listed on IDEAS

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    More about this item

    Keywords

    Liquidity; Cross-sectional; Asset pricing;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G1 - Financial Economics - - General Financial Markets

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