Asset-Specific and Systematic Liquidity on the Swedish Stock Market
This essay studies the effect of liquidity on stock returns on the Swedish stock market. Liquidity is addressed both as a market risk factor and an asset characteristics. We use the relative bid-ask spread as a proxy for liquidity level. The aggregate liquidity factor Illiquid-Minus-Liquid is constructed in a similar way to Fama-French SMB and HML factors. Using monthly time-series regressions on