Risk-free rate of return should equal the expected long-run growth rate of the economy with an adjustment for short-run liquidity.

What is meant by the last phrase, "adjustment for short-run liquidity"?

  • $\begingroup$ Can you give a reference for this? Did you read this somewhere? $\endgroup$ – Christian Fries May 5 '13 at 5:30
  • $\begingroup$ yes!..read it in "Analysis of Investments and Management of Porfolio" by Reily and Brown $\endgroup$ – Puneet Arora May 5 '13 at 6:58

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