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Investment Finance

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May 2015

A Market-Based Funding Liquidity Measure

Chen ZHUO, Andrea LU
We construct a traded funding liquidity measure from stock returns. Guided by a model, we extract the measure as the return spread between two beta-neutral portfolios constructed using stocks with high and low margins, to control for their sensitivity to the aggregate funding shocks. Our measure of ...
Keywords: Funding liquidity, Leverage, Margin requirements
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