Bridge over ocean
1 May 2013 Financial Analysts Journal Volume 69, Issue 3

Liquidity as an Investment Style

  1. Roger G. Ibbotson
  2. Zhiwu Chen
  3. Daniel Y.-J. Kim
  4. Wendy Y. Hu

Liquidity should be given equal standing with size, value/growth, and momentum as an investment style. As measured by stock turnover, liquidity is an economically significant indicator of long-run returns. The returns of liquidity are sufficiently different from those of the other styles that it is not merely a substitute. Finally, a stock’s liquidity is relatively stable over time, with changes in liquidity associated with changes in valuation.

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