Evaluating Systematic Liquidity Estimators

• Empirical work investigating commonality in liquidity and systematic liquidity risk utilizes various different estimators of systematic liquidity. This paper is the first to compare and contrast such estimators.  We distinguish two classes of systematic liquidity estimators that both have many followers in the literature: (1) weighted average estimators based on concurrent liquidity shocks and (2) principal components estimators based on both concurrent and past liquidity shocks. Our results show that the simpler weighted average estimators perform at least as well as the more complex principal components estimators. This finding is robust across different evaluation criteria and different underlying liquidity measures.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Business Administration (hsv//eng)

Nyckelord

Business studies

Företagsekonomi

företagsekonomi

Business Administration

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