Definition for : Liquidity premium
Among factors used in determining Risk, the criteria by which liquidity can be measured (size, Free float, transaction volumes, Bid-ask spread) are often statistically significant. In other words, liquidity often appears to be one of the factors determining the required Return on a Security. Liquidity Premium due to Free float, transaction volumes, Bid-ask spread should be separated from the so-called Size premium'.
(See Chapter 19 The required rate of return of the Vernimmen)
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