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Resiliency and Stock Returns

Author

Listed:
  • Jian Hua
  • Lin Peng
  • Robert A Schwartz
  • Nazli Sila Alan

Abstract

We present resiliency as a measure of liquidity and assess its relationship to expected returns. We establish a covariance-based measure, RES, that captures opening period resiliency, and use it to find a significant nonresiliency premium that ranges from 33 to 57 basis points per month. The premium persists after accounting for an extensive list of other liquidity-related measures and control variables. The results are significant for both value-weighted and equal-weighted returns, when micro-cap stocks are excluded, and for a sample of large cap stocks. The premium is particularly pronounced when trading volume is high.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Jian Hua & Lin Peng & Robert A Schwartz & Nazli Sila Alan, 2020. "Resiliency and Stock Returns," The Review of Financial Studies, Society for Financial Studies, vol. 33(2), pages 747-782.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:2:p:747-782.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhz048
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    Cited by:

    1. O’Sullivan, Conall & Papavassiliou, Vassilios G. & Wafula, Ronald Wekesa & Boubaker, Sabri, 2024. "New insights into liquidity resiliency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 90(C).
    2. Elham Daadmehr, 2024. "Workplace sustainability or financial resilience? Composite-financial resilience index," Risk Management, Palgrave Macmillan, vol. 26(2), pages 1-35, May.
    3. Alexandre Ripamonti & Raphael Videira & Denis Ichimura, 2020. "Asymmetric information and daily stock prices in Brazil," Estudios Gerenciales, Universidad Icesi, vol. 36(157), pages 465-472, December.
    4. Xuejun Jin & Jingyu Zhao & Xingguo Luo, 2022. "Why are the prices of European‐style derivatives greater than the prices of American‐style derivatives?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(9), pages 1772-1793, September.
    5. Kim, Jinyong & Kim, Yongsik, 2023. "Which stock price component drives the Amihud illiquidity premium?," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).

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