臺大管理論叢 NTU Management Review VOL.29 NO.1

The Illiquidity Premium: Further Evidence from Global and Asia-Pacific Markets 16 Return-weighted Method Value-weighted Method Volume-weighted Method IML c α IMLc IML c α IMLc IML c α IMLc Asia-Pacific Markets (16 countries) Mean 1.110 1.046 0.715 0.521 1.081 0.920 ( t -statistic) (6.95) (6.05) (5.91) (3.59) (5.87) (4.19) Median 1.014 1.029 0.656 0.573 0.937 0.773 % positive 100.0% 93.8% 100.0% 87.5% 100.0% 81.3% p -value 0.000 0.000 0.000 0.002 0.000 0.011 We formally test whether the illiquidity risk-adjusted premium alpha in the Asia- Pacific markets is significantly different from that in the rest of the world, controlling for the type of market (emerging versus developed). We estimate the following model: α IMLc = a0 + a1 *DUM-ASIAPAC c + a2 *DUM-EMERGE c In this regression, DUM-ASIAPAC c = 1 if the market is among the Asia-Pacific markets (zero otherwise) and DUM-EMERGE c = 1 if the market is an emerging one (zero otherwise). The regression has 45 observations for the 45 markets. We estimate this regression for the three methods of return weighting. We find the following results (in parentheses are the t -statistics). For return-weighted returns: a0 = 0.596 (3.82), a1 = 0.219 (0.95), a2 = 0.409 (1.82). R 2 = 0.11. For value-weighted returns: a0 = 0.380 (2.76), a1 = -0.046 (-0.22), a2 = 0.331 (1.66). R 2 = 0.06. For volume-weighted returns: a0 = 0.636 (3.55), a1 = 0.206 (0.77), a2 = 0.138 (0.54). R 2 = 0.03. The evidence shows that the risk-adjusted illiquidity premium in the Asia-Pacific markets is not significantly different from that in the rest of the world. The coefficient a1 is not significantly different from zero in all three regressions. In unreported results, we also find that the risk-adjusted illiquidity premium in a smaller set of seven markets in South-East Asia (namely, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, Taiwan, and Thailand) is similarly positive and not significantly different from the rest of the world.