Hua, J., Peng, L., Schwartz, R. A. and Alan, N. S.

Resiliency and Stock Returns

Review of Financial Studies

Vol. 33(2) pp. 747-782 (2020)

Abstract: We present resiliency as a measure of liquidity and assess its relationship to expected returns. We establish a covariance-based measure, RES, that captures opening period resiliency, and use it to find a significant nonresiliency premium that ranges from 33 to 57 basis points per month. The premium persists after accounting for an extensive list of other liquidity-related measures and control variables. The results are significant for both value-weighted and equal-weighted returns, when micro-cap stocks are excluded, and for a sample of large cap stocks. The premium is particularly pronounced when trading volume is high

Keywords: Stock Returns, Resiliency, Liquidity, Price Discovery, Asset Pricing

JEL Codes: G10, G11, G12, G14

Author links:

Publisher's Link: https://doi.org/10.1093/rfs/hhz048