Approaches to examination of Liquidity and Volatility Risk Pricing in Stock Markets–Implications for Indian Case

Abstract

Liquidity and Volatility Risks is twin asset pricing issues that altogether affect the operational functioning and pricing in stock markets all over the globe. In developed countries as well in emerging markets, the researchers have put in large efforts to find the liquidity and volatility risk structures in individual stocks and well as market as a whole. There is also an on-going research to explore whether there is a common uncertain factor across these risk classes. In this paper we provide a conceptual framework of the issue of liquidity and volatility and also the approaches used by researchers to measure the liquidity and volatility risk.