Strategy #0000000068 · Market liquidity and equity factors
Equity illiquidity premium and Amihud measure
Compute a simplified Amihud measure from absolute return and dollar volume, then inspect an illiquidity-spread scenario.
The Amihud illiquidity measure proxies price impact with absolute return relative to dollar volume. Research tests whether expected returns and sensitivity to marketwide liquidity are compensated. Higher historical returns are not executable premium: capacity, spreads and crisis costs can consume it.
Illiquidity may command a premium but brings wider spreads, price impact and exit risk in stress.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
How do Amihud price-impact proxies and assumed returns differ between illiquid and liquid baskets?
Mei compares an illiquid basket with a 2% mean absolute daily return and $1m volume against a liquid basket with 1% and $5m.
The simulator calculates a simplified |return|/dollar-volume Amihud proxy, then applies manually entered basket returns and trading costs.
This is not a liquidity-factor backtest. Dollar-volume scale, spread, zero-trade days, price impact and liquidity beta differ; crisis exit capacity may matter more than an average metric.
- Illiquid-basket Amihud proxyEnter absolute returns and dollar volumes for liquid/illiquid baskets, then assumed returns and costs to inspect proxies and spread.
- Liquid-basket Amihud proxyNo live quotes or volume data; the premium is user-assumed and no capacity or liquidity stress test is run.
- Assumed return spread after costsIllustrative expiry outcome.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
ILLIQ=10^6\frac{|r|}{DollarVolume},\quad R_{LS}=R_{illiquid}-R_{liquid}-Cost
r is daily return and DollarVolume same-day dollar volume; ILLIQ is a simplified per-million-dollar-scale proxy, not a universal threshold.
Greeks: the directional intuition
- 成交額尺度
- Measures sensitivity to implied volatility.
- 容量限制
- Measures sensitivity to implied volatility.
- 流動性尾部
- Measures sensitivity to implied volatility.
ILLIQ=10^6\frac{|r|}{DollarVolume},\quad R_{LS}=R_{illiquid}-R_{liquid}-Cost
Practical context · published observations
Equity illiquidity premium and Amihud measure: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
不讀取即時報價或成交資料；報酬溢酬是使用者假設，未做市場容量或流動性壓力測試。 Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related methods use different signals and assumptions.
Compare the rule, exposure and implementation limits.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Amihud price impact | Absolute return / dollar volume | Measures price response relative to traded value. | Corporate actions and volume quality affect the ratio. |
| Pastor–Stambaugh liquidity beta | Systematic liquidity risk | Measures return sensitivity to marketwide liquidity innovations. | Requires a long time-series estimate. |
| Zero-trade-day measure | Trading frequency | Uses no-trade days and turnover in the liquidity sort. | Distinguish halts from missing observations. |
No live quotes or volume data; the premium is user-assumed and no capacity or liquidity stress test is run.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.