Market Illiquidity and Conditional Equity Premium
研究发现，只有在控制了个体异质方差后，市场平均买卖价差才能预测未来市场回报，因为异质方差与价差正相关但对条件股权溢价有负效应，从而揭示了非流动性与回报的关系。
We examine the time‐series relation between aggregate bid‐ask spreads and conditional equity premium. We document that average marketwide relative effective bid‐ask spreads forecast aggregate market returns only when controlling for average idiosyncratic variance. This control allows us to document the otherwise elusive relation between illiquidity and returns. The reason is that idiosyncratic variance correlates positively with spreads but has a negative effect on conditional equity premium, causing an omitted variable bias. Our results are robust to standard return predictors, alternative illiquidity measures, and out‐of‐sample tests. These findings are important because they provide strong support for the literature's conjecture that marketwide liquidity is an important asset pricing risk factor.