An Empirical Investigation about Liquidity in Taiwan Stock Market −Using Amihud(2002) Liquidity proxy

Abstract
In this paper, we use the revised Amihud(2002) illiquidity proxy to do some empirical tests in Taiwan stock market. First, we find that there is a cross-sectional positive return-illiquidity relationship when size and market beta are not included in the independent variables. Second, we find that the relationship between individual illiquidity and market illiquidity is statistically positive. Last, we use the concept of market model to estimate two variables. One is the firm-specific illiquidity level and the other is the systematic illiquidity risk. From the cross-section regression, there is a statistically positive relationship between return and the systematic illiquidity risk when size and market beta are not included in the independent variables.