We introduce a novel economic indicator, named excess idle time (EXIT), measuring the extent of sluggishness in observed financial prices. Using a complete limit theory and formal tests, we provide econometric support for the fact that high-frequency transaction prices are, coherently with liquidity and asymmetric information theories of price determination, generally stickier than implied by the ubiquitous semi-martingale assumption and its noise-contaminated counterpart. EXIT provides, for every asset and each trading day, an effective proxy for the extent of illiquidity which is easily implementable using transaction prices only. When applied to the mar- ket, EXIT uncovers an economically-meaningful short-term and long-term compensation for illiquidity risk in market returns.
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