Introduction/objective:

This paper explored the relationship between liquidity risk and stock returns in the Chilean stock market, using three measures of liquidity risk widely used in other research and three measures to which the free float variable is added.

Methodology:

The analysis is performed using panel data regression for the period 2010-2019, the sample considers 46 Chilean companies with a total of 5,509 monthly observations.

Results:

These show a relationship between profitability and liquidity risk, but only for two of the measures used. Liquidity risk measures based on free float do not show results in this line.

Conclusions:

This work is another indication that financial risks are difficult to classify in a specific model and liquidity risk is no exception. All the previous evidence, as well as this research, indicates that liquidity risk can be measured and captured by different indices and models.