Backgrounder

August 17, 2009

Early Researcher Awards

Ontario is providing $11.5 million to support 82 emerging researchers and their teams at 21 institutions across Ontario. Each lead researcher will receive $140,000 through the Early Researcher Awards program.

Brock University

Illiquidity, Trading Costs, and Asset Pricing: Implications for the Canadian Capital Market
Lead researcher: Dr. Sahn-Wook  Huh
Number of researchers benefiting: 7

Do investors require/expect higher returns from less liquid securities? Dr. Huh’s research will help answer that question by estimating price-impact parameters using intra-daily order flows. He will process order flows via the Lee and Ready algorithm and estimate price-impact parameters based on four different models. In estimating the price-impact parameters, he will use the order flows processed from tick-by-tick trades and quotes data for a comprehensive set of stocks as well as options. Then, he will conduct Fama-MacBeth type cross-sectional regressions. His findings on whether illiquidity is a priced factor in the Canadian and U.S. capital markets will expand our knowledge of the markets.