Commonality In Liquidity And Its Determinants
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Commonality In Liquidity And Its Determinants
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Author : Sudhakar Reddy Syamala
language : en
Publisher:
Release Date : 2013
Commonality In Liquidity And Its Determinants written by Sudhakar Reddy Syamala and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
A stock's liquidity and its variability over time are of major concern for all the stakeholders of capital markets. Literature shows that market participants prefer liquid stocks and a stock's exposure to liquidity commonality is inversely proportional to market returns. Although the burgeoning literature on liquidity commonality shows that stocks have significant commonality, the major sources that cause it are yet unknown. Some studies have shown evidence for the supply-side determinants of liquidity commonality driven by funding constraints faced by market participants and some studies show evidence for the demand-side sources of liquidity commonality related to the correlated trading activity, level of institutional ownership. In this paper, we study the evolution of liquidity commonality over time by using quarterly data from 2001-2009 for NSE listed stocks and then determine the supply-side and demand-side sources of systematic liquidity. We construct Amihud's liquidity measure using daily data as a proxy for liquidity and estimate liquidity commonality of each stock on a quarterly basis from the market model time series regression of Chordia, Roll, and Subrahmanyam (2000). We find significant evidence of liquidity commonality for the sample period and also size effects in liquidity commonality. We find that supply-side sources of liquidity commonality significantly explain liquidity commonality, whereas, the demand-side sources are not significant in explaining liquidity commonality.
Determinants Of Commonality In Liquidity
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Author : Sudhakar Reddy Syamala
language : en
Publisher:
Release Date : 2017
Determinants Of Commonality In Liquidity written by Sudhakar Reddy Syamala and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Using an extensive, time-series, cross-sectional data-set of actively traded Indian stocks with up to 1.75 million firm-day observations, we discern the key determinants of commonality in liquidity among emerging markets.The paper shows evidence for both supply-side and demand-side factors contributing to liquidity commonality. However, the results are more supportive towards supply-side rationale for liquidity commonality among the firms where regulators and banks play an important source of commonality in liquidity, especially during market turmoil. Results are partially driven by the fact that the Indian stick exchange is an order-driven market. Economic activities like cheap exports and undervalued currency, rather than correlated trading by the institutional investors determine the demand for liquidity. These findings endorse the effect of high firm value, market return, liquidity, volatility, turnover, and alternate proxies of commonality in liquidity estimation.
The Determinants And Pricing Of Liquidity Commonality Around The World
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Author : Fariborz Moshirian
language : en
Publisher:
Release Date : 2017
The Determinants And Pricing Of Liquidity Commonality Around The World written by Fariborz Moshirian and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This paper examines the determinants and pricing of liquidity commonality using intraday data from 39 markets over 15 years. We show that liquidity commonality is driven by both market-level and firm-level factors. Liquidity commonality is higher in weaker and more-volatile economic and financial environments, in areas with poor investor protection, and in opaque information environments. Liquidity commonality is also affected by cultural and behavioral factors, including individualism and uncertainty avoidance. Moreover, we find that liquidity commonality is priced in the world's stock markets and that the pricing effect is stronger in developed markets.
Stock Market Liquidity Commonality And Its Determinants
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Author : Mohammed H. M. Abuzaid
language : en
Publisher:
Release Date : 2013
Stock Market Liquidity Commonality And Its Determinants written by Mohammed H. M. Abuzaid and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Liquidity (Economics) categories.
Common Determinants Of Liquidity And Trading
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Author : Tarun Chordia
language : en
Publisher:
Release Date : 2001
Common Determinants Of Liquidity And Trading written by Tarun Chordia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Business & Economics categories.
Understanding Commonality In Liquidity Around The World
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Author : George Andrew Karolyi
language : en
Publisher:
Release Date : 2011
Understanding Commonality In Liquidity Around The World written by George Andrew Karolyi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
We examine how commonality in liquidity varies across countries and over time in ways related to supply determinants (funding liquidity of financial intermediaries) and demand determinants (correlated trading behavior of international and institutional investors, incentives to trade individual securities, and investor sentiment) of liquidity. Commonality in liquidity is greater in countries with and during times of high market volatility (especially, large market declines), greater presence of international investors, and more correlated trading activity. Our evidence is more reliably consistent with demand-side explanations and challenges the ability of the funding liquidity hypothesis to help us understand important aspects of financial market liquidity around the world, even during the recent financial crisis.
Commonality In Liquidity
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Author : Tarun Chordia
language : en
Publisher:
Release Date : 2000
Commonality In Liquidity written by Tarun Chordia and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
Traditionally and understandably, the microscope of market microstructure has focused on attributes of single assets. Little theoretical attention and virtually no empirical work has been devoted to common determinants of liquidity nor to their empirical manifestation, correlated movements in liquidity. But a wider-angle lens exposes an imposing image of commonality. Quoted spreads, quoted depth, and effective spreads co-move with market- and industry-wide liquidity. After controlling for well-known individual liquidity determinants such as volatility, volume, and price, common influences remain significant and material. Recognizing the existence of commonality is a key to uncovering some suggestive evidence that inventory risks and asymmetric information both affect intertemporal changes in liquidity.
Commonality In Liquidity
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Author : Melanie Cao
language : en
Publisher:
Release Date : 2010
Commonality In Liquidity written by Melanie Cao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This study examines the property of liquidity in the option market. Using Ivy DB's OptionMetrics data for the period of January 1, 1996 to December 31, 2004, we establish convincing evidence of commonality in options liquidity. The commonality remains strong even after controlling for the impact of the underlying stock market and other liquidity determinants. Other findings include: 1) the stock market exhibits a much stronger commonality than does the option market, 2) compared with the inventory risk, information asymmetry plays a more dominant role in influencing options liquidity and 3) the market-wide option liquidity depends on the underlying stock market's movements - for instance, the bid-ask spread of calls decreases (increases) when the overall market goes up (down), while that of puts takes the opposite pattern. The study also uncovers several interesting phenomena that warrant future research. One such phenomenon is the negative relationship between the percentage bid-ask spread and the volatility, contrary to the previous empirical evidence and what the information asymmetry theory predicts.
Investigating Commonality In Liquidity
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Author : Charly Sujoto
language : en
Publisher:
Release Date : 2007
Investigating Commonality In Liquidity written by Charly Sujoto and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Liquid assets categories.
Systematic Liquidity And The Funding Liquidity Hypothesis
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Author : Xiaolin Qian
language : en
Publisher:
Release Date : 2014
Systematic Liquidity And The Funding Liquidity Hypothesis written by Xiaolin Qian and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
In order to reconcile weak evidence of supply-side determinants of commonality in liquidity in previous studies, we examine commonality in liquidity in China over the period 1995-2012. Consistent with supply-side explanations, we find that market declines and market volatility increase liquidity commonality. To identify the direct relationship between the supply-side determinants and commonality in liquidity, we provide two specific tests and show that an increase in market participants has a negative effect on liquidity commonality, while the share-split-structure reform in 2005-2007 that results in a large increase in shares supply has a positive impact on liquidity commonality. Finally, we find that commonality in liquidity also has a real impact on the economy.
