We develop a simple theory of realized illiquidity, defined as the ratio of realized volatility to trading volume. Building on the widely used price impact measure of Amihud (2002), we introduce the realized Amihud, which significantly improves measurement accuracy. Our theoretical and numerical results show that it robustly captures cumulative intraday price sensitivity to trading, accounting for stochastic volatility, microstructure noise, and information jumps. Empirically, we uncover distinct time-series patterns in realized stock illiquidity—heterogeneous clustering, leverage effects—and show that it predicts short-term returns.
Realized Illiquidity
Lacava, Demetrio;
2026-01-01
Abstract
We develop a simple theory of realized illiquidity, defined as the ratio of realized volatility to trading volume. Building on the widely used price impact measure of Amihud (2002), we introduce the realized Amihud, which significantly improves measurement accuracy. Our theoretical and numerical results show that it robustly captures cumulative intraday price sensitivity to trading, accounting for stochastic volatility, microstructure noise, and information jumps. Empirically, we uncover distinct time-series patterns in realized stock illiquidity—heterogeneous clustering, leverage effects—and show that it predicts short-term returns.File in questo prodotto:
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