Wenjin Kang, Associate Professor of Finance, Renmin University of China: A Re-examination of the Pricing of Liquidity

Time:2015-06-10 Print

Topic: A Re-examination of the Pricing of Liquidity

Speaker: Wenjin Kang, Associate Professor of Finance, Hanqing Advanced Institute of Economics and Finance, Renmin University of China.

Date: June 10th (Wed.)

Time: 12:30pm-1:30pm

Location: Building 1, Room 501, Faculty Lounge

Language: English


We reexamine the pricing of liquidity on stock market from a new perspective by controlling the influence from information uncertainty. Stocks with low liquidity exhibit high information uncertainty. Low liquidity suggests higher expected returns, but high information uncertainty is usually followed by lower subsequent returns. We use two-way dependent portfolio sorting method to separate these two effects from each other. After controlling for information uncertainty, we find that the liquidity premium remains statistically significant and economically important in sample periods both before and after 1990’s. The risk-adjusted liquidity premium in the NYSE/AMEX stock sample is 0.90% and 0.67% per month for the subsample periods of 1964~1988 and 1989~2013, respectively. Both of them are significant at 1% significance level. Furthermore, our liquidity premium is significantly positive in both January and non-January months. We find similar results in NASDAQ market.

About the speaker:

Wenjin Kang is an associate professor of finance at Hanqing Advanced Institute of Economics and Finance, Renmin University of China. He teaches Advanced Topics of Asset Pricing and Market Microstructure for finance and economics Ph.D. students, and Asset Pricing for master students. His primary research interest is empirical asset pricing, with focus on liquidity, commodity market, and volatility. He earned a Ph.D. in management and Master in economics from University of California, Los Angeles. He joined School of Finance at Renmin University of China in 2013. From 2013 to 2014, he was an assistant professor at NUS Business School of National University of Singapore.



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