Liquidity Premium, Liquidity-Adjusted Return and Volatility, and Extreme Liquidity
Liquidity Premium, Liquidity-Adjusted Return and Volatility, and Extreme Liquidity ArXiv ID: 2306.15807 “View on arXiv” Authors: Unknown Abstract We establish innovative liquidity premium measures, and construct liquidity-adjusted return and volatility to model assets with extreme liquidity, represented by a portfolio of selected crypto assets, and upon which we develop a set of liquidity-adjusted ARMA-GARCH/EGARCH models. We demonstrate that these models produce superior predictability at extreme liquidity to their traditional counterparts. We provide empirical support by comparing the performances of a series of Mean Variance portfolios. ...