This paper examines the relationship between bid–ask spread approach proposed by Corwin and Schultz to measure illiquidity and its impact on excess stock returns in the Indonesian stock exchange using extended Fama and French models. The sample of the study is daily stock prices in the KOMPAS 100 Index covering the first quarter of 2013 up to second quarter 2016. Data regression analysis suggests that a stock's illiquidity is not a price factor in the Indonesian market even after controlling three factors from Fama and French. Concentrated ownership of a firm by the founder and his or her family might lead to thin liquidity in the market because owners tend to hold their stocks; thus, there is only limited stocks for transactions in the market. As expected, market risk and size premium have a positive effect on excess stock returns; however, considering other factors based on Fama and French, the value premium factor is not significantly linked to capital asset pricing. Lagged return is a variable and an important factor for consideration before making an investment. Additionally, a positive relationship between inflation and excess returns implies that the Indonesian capital market has provided a hedge against inflation.