Equity Market Liquidity as an Asset Allocation Signal
December 5, 2012 - Strategic Allocation
Is equity market liquidity useful as an asset allocation signal? In their November 2012 paper entitled “Liquidity-Driven Dynamic Asset Allocation”, James Xiong, Rodney Sullivan and Peng Wang examine the performance of a dynamic stocks-bonds allocation strategy with weightings based on equity market liquidity. For liquidity measurement, they focus on monthly changes in Amihud illiquidity (aggregating individual responses of stock… Keep Reading