Stocks with poor past returns (low liquidate stocks) outperformed those with relatively well past performance (high liquidate stocks).
High liquidate and low liquidate stocks were selected based on the returns for the past week.
In their study, a similar strategy to that of Lo and MacKinlay was employed where stocks were ranked using past one-week returns, and the contrarian portfolio was held for the follow high liquidate week.
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.