PARTIAL · slow premium
Hypothesis
Less-liquid alts (high Amihud illiquidity) carry a return premium for bearing liquidity risk; tilting toward them harvests it.
Math — Amihud illiquidity
$$ \text{ILLIQ}_i = \frac{1}{D}\sum_{d} \frac{|r_{i,d}|}{\text{VolumeUSD}_{i,d}} $$
Method
Rank alts by Amihud, long the illiquid tertile / short the liquid, monthly rebalance, costs (which are themselves higher for illiquid names).
Results
| Gross premium | positive |
| Net after (high) illiquid trading cost | thin |
| Tail risk in stress | severe (liquidity dries) |
The premium is real but self-consuming: the illiquid names that pay it are the expensive ones to trade, and the premium evaporates (turns sharply negative) in stress when liquidity vanishes. A small, fragile tilt at best.
A liquidity premium is rent for a risk that shows up all at once. The assets that pay it are the ones you cannot exit when you need to.