Most people don’t think about it, but there is a liquidity premium on publicly traded securities just as there is a risk premium, yet most only think about it in the case of extremely illiquid assets such as private equity.
However the liquidity premium is separate and distinct and there is a way to manage it to your advantage. This is what Roger Ibbottson, the former chairman of Ibbotson and Associates, is into these days as Chief Investment Officer of Zebra Capital Management. Zebra manages portfolios and hedge funds with an eye to capturing this liquidity premium.
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