Predicting Extreme Quantiles of Financial Returns: The Role and Information Content of Market Liquidity
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| Year of publication | 2022 |
| MU Faculty or unit | |
| Web | Associated project |
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| Description | An accurate estimation of uncertainty related to the prices of financial assets is among the main interests of researchers and practitioners. Due to the ever changing nature of financial markets, it is still a challenge to find good explanatory variables of the market risks. Within these, we show that the liquidity measures bear useful information content related to the forecasts of extreme quantiles of price returns. In addition, we demonstrate the liquidity explanatory power to differ with the size of market capitalization on total sample of 190 companies. Lastly, we provide an evidence on the issue of mutual interchangeability of liquidity benchmarks and liquidity proxies. |
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