Popis: |
This paper suggests a new measure of stock market resiliency and demonstrates that resiliency is a dimension of liquidity that generates cross-sectional variations in stock returns. Resiliency is defined as quickness of the transitory price recovery from a liquidity shock. Using the Beveridge-Nelson decomposition and the spectral analysis in the frequency domain, we measure resiliency as the speed of mean reversion of transitory price components. Our main finding is that a zero-investment portfolio long in low-resiliency stocks and short in high-resiliency stocks earns significant abnormal returns. We also find that our resiliency measure is complementary to existing liquidity measures. |