An Investigation on liquidity Risk in Bullish and Bearish of Tehran Security Exchange Market: Insights from liquidity-adjusted CAPM

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OSOOLIAN MOHAMMAD; HassanNezhad Mohammad; Samiee Tabrizi Pedram

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Journal: FINANCIAL RESEARCH Year:2019 | Volume:21 | Issue:2 Page(s): 293-320

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Title

An Investigation on liquidity Risk in Bullish and Bearish of Tehran Security Exchange Market: Insights from liquidity-adjusted CAPM

Author(s)

OSOOLIAN MOHAMMAD | HassanNezhad Mohammad | Samiee Tabrizi Pedram | Issue Writer Certificate

Keywords

LiquidityQ1

Liquidity riskQ1

Asset pricing modelQ1

Liquidity measurement ratiosQ1

Bullish and bearish marketQ1

Abstract

Objective: Liquidity plays a major role in financial markets, specifically in easing the burden of sharing the risks and also in improvement of efficiency of transactions. Liquidity risk can be defined as the risk of being unable to buy or sell an asset in a specific time frame without it losing value. The main goal of the present study is to to study the effects of Liquidity-adjusted Capital Asset pricing model (LCAPM) with Bullish and Bearish of Tehran Security Exchange Market to find the better model to explain expected return of stocks. Methods: One of the new areas in capital Asset pricing models are the "Liquidity-adjusted capital Asset pricing models" which help us in this regard using the factor-based modeling tools. In this study, Amihud ilLiquidity measure is used as the indicator of Liquidity of transactions of shares and time structure breakdown has been used to determine the type of the market. Results: The results of the study shows that firstly, Amihud measure is in comparison one of best measures for Liquidity risk estimation. Also, cumulative Liquidity measure has a reverse relationship with stock returns. Meanwhile, it has been shown, for both bear and bull markets separately, that Liquidity has a positive effect on stock returns. Conclusion: In contrast to heterogeneous effects of Liquidity risk of capital market on expected rate of return, by separating the market into bear and bull markets, the positive effects of Liquidity risk on expected rate of returns can be observed. Therefore, one can conclude that effect of this type of risk on expected return is positive in the bear markets and is higher than bull markets.

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APA: Copy

OSOOLIAN, MOHAMMAD, HassanNezhad, Mohammad, & Samiee Tabrizi, Pedram. (2019). An Investigation on liquidity Risk in Bullish and Bearish of Tehran Security Exchange Market: Insights from liquidity-adjusted CAPM. FINANCIAL RESEARCH, 21(2 ), 293-320. SID. https://sid.ir/paper/91144/en

Vancouver: Copy

OSOOLIAN MOHAMMAD, HassanNezhad Mohammad, Samiee Tabrizi Pedram. An Investigation on liquidity Risk in Bullish and Bearish of Tehran Security Exchange Market: Insights from liquidity-adjusted CAPM. FINANCIAL RESEARCH[Internet]. 2019;21(2 ):293-320. Available from: https://sid.ir/paper/91144/en

IEEE: Copy

MOHAMMAD OSOOLIAN, Mohammad HassanNezhad, and Pedram Samiee Tabrizi, “An Investigation on liquidity Risk in Bullish and Bearish of Tehran Security Exchange Market: Insights from liquidity-adjusted CAPM,” FINANCIAL RESEARCH, vol. 21, no. 2 , pp. 293–320, 2019, [Online]. Available: https://sid.ir/paper/91144/en

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