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There is reason to believe that market makers may react asymmetrically to purchases and sales on account of their tendency to hold positive inventories. The paper estimates separate buy- and sell-side price impact measures for a large cross-section of stocks over more than 20 years. The paper finds pervasive evidence that sell-side illiquidity exceeds buy-side illiquidity. Both illiquidity measures co-move significantly with the TED spread, which is a measure of funding illiquidity. Previous studies of the effect of liquidity on asset pricing have used measures of liquidity that assume that trading costs are symmetric for purchases and sales.
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