What does the Amihud ratio measure?

The Amihud ratio measures price impact per dollar of trading volume. A high ratio means small trades move prices a lot — the stock is illiquid. It's a simple, widely-used liquidity proxy.

What is the illiquidity premium?

Stocks with higher Amihud ratios tend to earn higher returns as compensation for illiquidity risk. This illiquidity premium is typically 2-4% per year for the most illiquid stocks.

Amihud Illiquidity Ratio Calculator

Calculate the Amihud (2002) illiquidity ratio: average daily absolute return divided by dollar trading volume. Use this measure to assess stock liquidity, estimate illiquidity premia, and screen for liquidity risk in portfolios.

Principal ($)

Annual Rate (%)

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Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the Amihud (2002) illiquidity ratio: average daily absolute return divided by dollar trading volume. Use this measure to assess stock liquidity, estimate illiquidity premia, and screen for liquidity risk in portfolios. Use the amihud illiquidity result to inform your calculation.

Amihud Illiquidity Ratio Calculator

How to Use

Frequently Asked Questions

What does the Amihud ratio measure?

What is the illiquidity premium?