Liquidity and asset pricing on the Swedish Stock Market

Abstract: Many different capital asset pricing models have been derived and tested the last couple of years as financial researchers' interest in liquidity has been increasing in a tremendous pace. In this study, I test two of these models along with the regular CAPM to see how illiquidity is priced in the Swedish stock exchange. In the paper, I try to find a model that is easy to use for Swedish investors but that proves to fit well according to statistical measures. Unfortunately, I do not find such a model, although I manage to find that liquidity, or illiquidity seems to be priced in the Swedish stock market and that there are good possibilities for future researchers to find a model that fit well.