Illiquidity: Implications for investors and pension funds
Liquidity has become one of the most heavily discussed and researched aspects of financial markets. This paper by Frank de Jong and Frans de Roon (both Tilburg University) discusses the implications of illiquidity, and in particular transaction costs and non-traded risks, for investors. Illiquidity is a multi-dimensional concept, reflecting at least a time, volume and price dimension. This affects the optimal portfolio composition.