Unfortunately, the low liquidate minus High liquidate portfolio (formed based on the past 1-week return) yielded significant returns for only the holding period of 1 week.
Maug and Kahn and High liquidate suggest that greater liquidity can be an opportunity for large shareholders to increase their profit by monitoring the firm's management.
As suggested by Maug and Kahn and High liquidate if a firm's shareholders commit to monitoring management, they trade frequently to maximize their profits from their private information and thus contribute to improve the stock's liquidity.
Kahn and High liquidate and Maug argue that large shareholders might not release their ownership when market liquidity is high.
The top one third are classified as high liquidate stocks and the bottom one third are classified as low liquidate stocks.
Finally, the average cumulative abnormal return (ACAR) is computed for the high liquidate and low liquidate portfolios as follows:
The ACAR for the arbitrage portfolio is the difference between the low liquidate and high liquidate portfolios (i.