A price distortion in asset markets that results from using prices that are stale because of infrequent trading or lack of trading (i.e., low liquidity or illiquidity). For assets with stale prices, measured correlations may be lower than expected, and depending on the time period in question, measured standard deviation (volatility) may be higher or lower than would be the case if actual prices are available. Even in traditional asset markets, prices are often figured out using factor models, appraisal values, and so on. Therefore, reported prices do not reflect current market prices. In a nutshell, if the market of a given asset is illiquid, the volatility of prices may be much higher or lower than expected.

If an asset/security is marked to market on a daily basis, there would be no stale price bias.