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We then examine why liquid assets may be priced more highly than otherwise similar illiquid assets and why some investors value liquidity more than others. We follow up be presenting the empirical evidence that has accumulated over time and across different assets – financial and real – on the cost of illiquidity.
Nov 5, 2024 · Liquid assets are typically easier to obtain and convert to cash, making them suitable for meeting immediate obligations. On the other hand, illiquid assets are held over a longer period, providing greater potential for growth and stability but less flexibility. Here are the main differences between liquid and illiquid assets: 1. Cash Accessibility
Aug 9, 2024 · Discover the importance of liquid assets and learn how to determine and compute them effectively. This comprehensive guide provides a step-by-step approach and 25+ examples to help you assess your financial liquidity.
Liquid alternatives complement allocations to illiquids, in at least two ways. First, in strategic asset allocations that seek to achieve return targets and funding status objectives within a framework balancing portfolio exposure to identified risk factors, including illiquidity.
Jul 19, 2022 · Assets often yield lower returns than illiquid asset due to lower incurred risk. Assets may be less volatile as it is more difficult to sell.
- Jim Mueller
We present a model of optimal allocation over liquid and illiquid assets, where illiquidity is the restriction that an asset cannot be traded for intervals of uncertain duration. Illiquidity leads to increased and state-dependent risk aversion, and reduces the allocation to both liquid and illiquid risky assets.
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L IQUIDITY (OR MARKETABILITY) is a key attribute of capital assets, and it strongly affects their pricing. The liquid- ity effect can be likened to the widely known effect of risk on capital assets. Risk-averse inves- tors require higher expected returns to compen- sate for greater risk. Similarly, investors prefer.
