Equity prices depend on risk, expected return, and market liquidity. Market liquidity, however, is an elusive variable. Prevailing thinking relates primarily to revealed liquidity (e.g., posted orders). The authors propose the concept of latent liquidity to complement this definition and discuss liquidity in terms of its empirical assessment, dependence on market structure, and effect on asset pricing. Regarding regulatory policy concerning market structure, the objective should be to enhance market quality, which is tantamount to liquidity provision. This should lead to extended economic benefits because one thing is widely agreed on: All financial markets would benefit from being more liquid. TOPICS: Portfolio theory, portfolio construction, equity portfolio management Key Findings • The title itself says it: Liquidity is an elusive variable. It is hard to define, measure, and find. • A large and important component of liquidity is latent liquidity: orders that are not posted on a lit book. Consequently, it is not possible to quantify liquidity empirically. • Illiquidity leaves its footprints in the transaction record: accentuated intraday price volatility and return autocorrelation. These are affected by the structural design of a financial market and by market structure regulation.

中文翻译：

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市场流动性：一个难以捉摸的变量

股票价格取决于风险，预期收益和市场流动性。但是，市场流动性是一个难以捉摸的变量。普遍的思维主要与所显示的流动性（例如，已下达的订单）有关。作者提出了潜在流动性的概念以补充该定义，并从其经验评估，对市场结构的依赖以及对资产定价的影响等方面讨论流动性。关于市场结构的监管政策，目标应该是提高市场质量，这相当于提供流动性。这应该导致扩大的经济利益，因为人们普遍同意一件事：所有金融市场都将因流动性更大而受益。主题：投资组合理论，投资组合构建，股权投资组合管理主要发现•标题本身说：流动性是一个难以捉摸的变量。很难定义，度量和查找。•流动性的一个重要组成部分是潜在的流动性：未在平淡账簿上过账的订单。因此，不可能凭经验量化流动性。•非流动性在交易记录中留下足迹：日内价格波动加剧和收益自相关。这些受金融市场的结构设计和市场结构法规的影响。