P/F/374. Relationship between cross-sectional stock return variation and turnover rate as a proxy for liquidity
(2005, 3500 words)
The paper examines the relationship between the stock returns and the liquidity seeking to understand whether or not the cross-sectional variation in stock returns is driven by the changes in the turnover rate (a proxy for liquidity). The test is designed and conducted to measure the liquidity of cross-sectional returns by using the turnover rate in 543 random non-financial UK firms over the period from 1993 to 2003. Conclusions are made about the significance of liquidity (turnover rate) and seasonality phenomenon.
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