Liquidity and asset prices: An empirical investigation from the Nordic stock markets

Hilal Butt, Nader Shahzad Virk

Research output: Contribution to journalArticleScientificpeer-review

14 Citations (Scopus)


This paper presents a simplified single period asset-pricing model adjusted for liquidity and tests it for the Nordic markets. The detailed empirical evidence is presented from Finnish test case. Empirical testing of small yet developed markets is motivated by the increased relevance of the illiquidity effect for illiquid assets/markets. The main evidence reports liquidity risk makes sufficiently larger part of predicted factor risk premium than the market risk, contrary to comparable US evidence. This highlights the ability of liquidity related model betas in capturing the time variation in expected returns across illiquid (Nordic) markets than market beta.
Original languageEnglish
Article numberEUFM.12041
Peer-reviewed scientific journalEuropean Financial Management
Number of pages34
Publication statusPublished - 02.03.2014
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • Asset-pricing model
  • illiquidity effect
  • predicted factor risk premium
  • model betas
  • KOTA2014


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