Estimating the effect of liquidity risk on risk premia: An analysis of the Philippine equity market for the years, 1989-2012

Date of Publication

2014

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Junette A. Perez

Defense Panel Member

Rene Betita

Ricarte Pinlac

Kashmirrl Ibanez

Abstract/Summary

The liquidity preference theory of market prices states that a rational investor would be willing to pay more for a more liquidity asset and would require a significant premium before opting to buy one that is less liquid. Previous studies on the effects of undiversifiable risk on the risk premium conducted in the Philippines that made use of the basic capital asset pricing model yielded inconclusive results hence, this study made use of a modified version of the model-- the liquidity-adjusted capital asset pricing model-- in order to single out the effect of liquidity on the risk premium. Data on the different stocks listed in the Philippine equity market during years 1989-2012 was gathered from Technistock Philippines, Incorporated and the Philippine Institute for the Development Studies. The study determined that liquidity risk is insignificant in determining risk premium in the Philippine market due to market inefficiencies, irrationality of investor behavior, and a need for more observations.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21236

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

108 leaves : illustrations (some color) ; 28 cm. + 1 computer disc ; 4 3/4 in.

Keywords

Stock exchanges--Philippines; Stocks--Prices

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