| Summary: | 碩士 === 國立高雄第一科技大學 === 金融系碩士班理財組 === 104 === Literature have shown the relationship between stock returns and idiosyncratic risk, stock returns and liquidity risk. However, few have been discussing about idiosyncratic risk and liquidity. In this study, we try to figure the relationship between idiosyncratic risk and liquidity by using option and stock market data. The reason we use option market data is that it has the characteristic of high leverage and low trading cost which implies informed traders might trade their information in option markets. The empirical results show that first, there is a positive relation between idiosyncratic risk and stock returns; second, when using open interest as the liquidity proxy, we also have a positive relation between liquidity and returns. In addition, the size effect exists in our sample.
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