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The authors study the effect of real asset liquidity on a firm's cost of capital. They find an aggregate asset-liquidity discount in firms' cost of capital that is strongly counter-cyclical. At the firm-level they find that asset liquidity affects firms' cost of capital both in the cross section and in the time series: Firms in industries with more liquid assets and during periods of high asset liquidity have lower cost of capital. This effect is stronger when the asset liquidity is provided by firms operating within the industry.
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