The Variation of Liquidity Risk Premium

New liquidity measure, based on trading volume induced by order flow as in Pastor and Stambaugh (2002) but estimated with turnover rather than with absolute level of dollar volume, is introduced and analyzed in this paper. Aggregate liquidity measures are found to well track the history of market liquidity problems. However, market price of liquidity risk, estimated as a coefficient of liquidity shock, does not show any systematic timeseries behavior so we could not find the variables which have significant explanatory power for liquidity risk premium. [ABSTRACT FROM AUTHOR] Copyright of Seoul Journal of Business is the property of Seoul National University, College of Business Administration and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)This research was funded by Hanyang University New Faculty Research Grant