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- Title
Illiquidity and Price Informativeness.
- Authors
Kerr, Jon; Sadka, Gil; Sadka, Ronnie
- Abstract
This paper shows that liquidity conditions are important determinants of the predictability of earnings. Liquid stock prices are more informative about future firm earnings growth than illiquid stock prices. Because information-related illiquidity can arise when uncertainty is high, we focus our analysis on evidence that noninformational liquidity affects price informativeness. Endogeneity is further addressed using controls for market uncertainty and several exogenous shocks as natural experiments. Thus, our results lend support for the impact of liquidity on price discovery. This paper was accepted by Lauren Cohen, finance.
- Subjects
STOCK prices; FINANCE
- Publication
Management Science, 2020, Vol 66, Issue 1, p334
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2018.3154