Liquidity-adjusted Asset Pricing Model

There have been tremendous literatures shedding light on the capital asset pricing model(CAPM),which is the most fundamental and important model in the academia and industry.It is of great value to find a proper asset pricing model which has great explanatory power.Unconditional CAPM performs badly with respect to the return abnormality such as size effect,value effect and momentum effect.Consequently.conditional CAPM has been developed rapidly as a dynamic expansion to the original version.Moreover, liquidity factor has been perceived as an important factor when determining the asset pricing model which should be incorporated as well.This paper tries to find some clues to the new model after reviewing the related literatures,proposing data collection method and theoretical model,and conducting empirical study and robustness test.Furthermore,this empirical evidence is of great value for further studies.