Liquidity and asset pricing: A comparison between three-factor and three-moment capital asset pricing models

Liquidity is an important attribute of an asset that investors would like to take into consideration when making investment decisions. However, the previous empirical evidence whether liquidity is a determinant of stock return is not unanimous. This dissertation provides a very comprehensive study about the role of liquidity in asset pricing using the Fama-French (1993) three-factor and Kraus and Litzenberger (1976) three-moment CAPM as models for risk adjustment. The relationship between liquidity and well-known determinants of stock returns such as size and book-to-market are also investigated. This study examines the liquidity and asset pricing issues for both intertemporal as well as cross-sectional data. ^ The results indicate an existence of a liquidity premium, i.e., less liquid stocks would demand higher rate of return than more liquid stocks. More specifically, a drop of 1 percent in liquidity is associated with a higher rate of return of about 2 to 3 basis points per month. Further investigation reveals that neither the Fama-French three-factor model nor the three-moment CAPM captures the liquidity premium. Finally, the results show that well-known determinants of stock return such as size and book-to-market do not serve as proxy for liquidity. ^ Overall, this dissertation shows that a liquidity premium exists in the stock market and that liquidity is a distinct effect, and is not influenced by the presence of non-market factors, market factors and other stock characteristics.^

Analysis and design of tall concrete buildings : an investigation regarding the use of cracked versus un-cracked moment of inertia

A debate is currently prevalent among the structural engineers regarding the use of cracked versus un-cracked moment of inertia of the structural elements in analyzing and designing tall concrete buildings. (The basic definition of a tall building, according to the Journal of Structural Design of Tall Buildings Vol. 13. No. 5, 2004 is a structure that is equal to or greater than 160 feet in height, or 6 stories or greater.) The controversy is the result of differing interpretations of certain ACI (American Concrete Institute) code provisions. The issue is whether designers should use cracked moment of inertia in order to estimate lateral deflection and whether the computed lateral deflection should be used to carry out subsequent second-order analysis (analysis considering the effect of first order lateral deflections on bending moment and shear stresses). On one hand, bending moments and shear forces estimated based on un-cracked moment of inertia of the sections may result in conservative designs by overestimating moments and shears. On the other hand, lateral deflections may be underestimated due to the same analyses resulting in unsafe designs.