Illiquid Minus Liquid (IML)

Daily Returns: from February 1, 2001.

The Illiquid Minus Liquid Factor (IML) is the return of a portfolio long on liquid stocks (low) and short on illiquid stocks (high)

Every month t, we (ascending) sort the eligible stocks into 3 quantiles (portfolios) according to their previous twelve month moving average of illiquidity, as in Amihud (2002), as shown in the following table:


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|          Illiquidity           |        Type of Portfolio        |

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|          1st tercile           |              Low                |

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|          2st tercile           |             Neutral             |

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|          3st tercile           |              High               |
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Then, we compute equal-weighted returns of the first portfolio (low illiquidity) and the third portfolio (high illiquidity). The IML Factor is the return
of the liquid stocks portfolio minus the return of the illiquid stocks portfolio.

The Eligibility Criteria

A stock traded in BOVESPA is considered eligible for year t if it meets 3 criteria:

- The stock is the most traded stock of the firm (the one with the highest traded volume during last year);

- The stock was traded in more than 80% of the days in year t-1 with volume greater than R$ 500.000,00 per day. In case the stock was listed in year t-1, the period considered goes from the listing day to the last day of the year;

- The stock was initially listed prior to December of year t-1.