Liquidity is a risk factor that ________.
A) has yet to be accurately measured and incorporated into portfolio management
B) is unaffected by trading mechanisms on various stock exchanges
C) has no effect on the market value of an asset
D) affects bond prices but not stock prices

Question

Quizplus · Accepted Answer

Liquidity risk refers to the risk associated with the ease of converting an asset into cash without significantly affecting its market price. It is a complex factor that has been challenging to measure accurately and incorporate into portfolio management strategies. Trading mechanisms, market conditions, and various asset characteristics can influence liquidity, making it a significant consideration across different types of investments, including both stocks and bonds.

Liquidity Is a Risk Factor That ________