Introduction
\citet*{Amihud} showed illiquidity positively affects ex ante stock excess return, suggesting that expected stock excess return partly represents an illiquidity premium. Stock excess return, traditionally called ‘‘risk premium’’, has been considered a compensation for risk. This paper proposes that expected stock excess return also reflects compensation for expected market illiquidity.
\citet*{BLUME_1994} investigates the applicability of the informational role of volume for technical analysis, showing that volume provides information on quality information for traders, that cannot be deduced from price statistic. They also show that traders who use information contained in market statistics do better than traders who do not.
\citet*{Brennan_1996} investigates the empirical relation between monthly stock returns and measures of illiquidity obtained from intraday data. They find a significant a significant relation between required rates os return and these measures after adjusting for the Fama and French risk factors, and also after accounting for the effects of the stock price level.
\citet*{EASLEY_1996} most important empirical result is that the probability os information-based is lower for high volume stocks. It also provides evidence of the economic importance of information-based trading on spreads.
( Pathirawasam (2011)) revealed that stock returns are positively related to the contemporary change in trading volume. Further, it was found that past trading volume change is negatively related to stock returns. Investor misspecification about future earnings or illiquidity of low volume stocks can be the reason for the negative relationship between trading volume and stock returns.
\citet*{Pastor_2001}find that expected stock returns are related cross-sectionally to the sensitivities of returns to fluctuations in aggregate liquidity. A liquidity risk factor accounts for half of the profits to a momentum strategy over a 1966-1999 period.
\citet*{Kim_2014} research implies that the systematic component measured by each liquidity proxy is correlated across measures and the shocks to the sistematic and common component of liquidity are an undiversifiable source of risk.
\citet*{Chiang_2015}
\citet*{Amihud_2012}