Impact of liquidity on stock returns listed in Borsa Istanbul

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Author
Emrah, Nermin
Advisor
Altay-Salih, Aslıhan
Date
2015Publisher
Bilkent University
Language
English
Type
Thesis
Metadata
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http://hdl.handle.net/11693/18372Abstract
This study investigates the impact of liquidity on returns of stocks traded at
Borsa İstanbul for the 2002-2014 period. Turnover rate, which is defined as average
volume of a firm divided by the number of shares outstanding of that firm, is used as
a liquidity measure. Liquidity effect is examined following panel data analysis and
robust estimators controlling the effect of well-known firm-specific characteristics.
The results show that turnover rate has a significant and negative effect on stock
returns. This result indicates that investors request compensation for holding illiquid
assets. In other words, they request compensation for the assets with low turnover. The
impact of turnover rate on stock returns is significant for the whole year; therefore,
results are not driven by the January effect.