Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209887 
Year of Publication: 
2007
Series/Report no.: 
Working Paper No. 2007/11
Publisher: 
Norges Bank, Oslo
Abstract: 
We use data on actual holding periods for all investors in a stock market over a 10 year period to investigate the links between holding periods, liquidity, and asset returns. Microstructure measures of liquidity are shown to be important determinants of the holding period decision of individual investors. We also find evidence that the average holding period is different for different investor groups. Interestingly, we find that turnover is an imperfect proxy for holding period. Moreover, while both turnover and spread are related to stock returns, holding period is not. Our results suggest that the link between liquidity and asset prices found in numerous empirical studies cannot be explained by models such as Amihud and Mendelson (1986) where investors merely want to be compensated for exogenous trading costs.
Subjects: 
market microstructure
liquidity
holding period
JEL: 
G10
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-410-9
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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