Liquidity Commonality And Pricing In Uk Equities
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Liquidity Commonality And Pricing In Uk Equities
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Author : Jason Foran
language : en
Publisher:
Release Date : 2015
Liquidity Commonality And Pricing In Uk Equities written by Jason Foran and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We investigate the pricing of systematic liquidity risk in UK equities using a large sample of daily data. Employing four alternative measures of liquidity we first find strong evidence of commonality in liquidity across stocks. We apply asymptotic principal component analysis (PCA) on the sample of stocks to extract market or systematic liquidity factors. Previous research on systematic liquidity risk, estimated using PCA, is focused on the US, which has very different market structures to the UK. Our pricing results indicate that systematic liquidity risk is positively priced in the cross-section of stocks, specifically for the quoted spread liquidity measure. These findings around the pricing of systematic liquidity risk are not affected by the level of individual stock liquidity as a risk characteristic. However, counter-intuitively, we find that the latter is negatively priced in the cross-section of stocks, confirming earlier research.
The Asset Pricing Effects Of Uk Market Liquidity Shocks
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Author : Jason Foran
language : en
Publisher:
Release Date : 2014
The Asset Pricing Effects Of Uk Market Liquidity Shocks written by Jason Foran 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.
Using tick data covering a 12 year period including much of the recent financial crisis we provide an unprecedented examination of the relationship between liquidity and stock returns in the UK market. Previous research on liquidity using high frequency data omits the recent financial crisis and is focused on the US, which has a different market structure to the UK. We first construct several microstructure liquidity measures for FTSE All Share stocks, demonstrating that tick data reveal patterns in intra-day liquidity not observable with lower frequency daily data. Our asymptotic principal component analysis captures commonality in liquidity across stocks to construct systematic market liquidity factors. We find that cross-sectional differences in returns exist across portfolios sorted by liquidity risk. These are strongly robust to market, size and value risk. The inclusion of a momentum factor partially explains some of the liquidity premia but they remain statistically significant. However, during the crisis period a long liquidity risk strategy experiences significantly negative alphas.
Systematic Liquidity And Expected Returns
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Author : Evangelos Giouvris
language : en
Publisher:
Release Date : 2003
Systematic Liquidity And Expected Returns written by Evangelos Giouvris and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
Amihud amp; Mendelson (1986), Eleswarapu amp; Reinganum (1993), Brennan amp; Subrahmanyam (1996), Datar et al (1998) and Amihud (2002) have argued that predictable differences in liquidity lead to cross-sectional differences in expected returns. A natural extension of this argument is that if liquidity is random and covaries across stocks as documented by Chordia et al (2000) and Huberman amp; Halka (2001) then a stock's sensitivity to systematic liquidity randomness could potentially play the role of a priced risk factor. Decline in systematic liquidity has been blamed for the crash of October 1987 and the global bond market liquidity crisis the summer of 1998. This study aspires to cover the absence of research in the area of systematic liquidity and its effect on expected returns under normal trading conditions for the UK market employing FTSE100 as its sample. I use daily data from October 1996 to May 2001 incorporating four different trading/price reporting regimes and find that i) liquidity proxied by absolute and proportional bid-ask spread has decreased over the years despite attempts of the London Stock Exchange to make the UK market a more competitive market ii) absolute and proportional spread exhibit a systematic time-varying component even after controlling for a number of variables known to affect spread and iii) systematic liquidity appears to have an important role on stock pricing before the introduction of SETS (order-driven stock exchange electronic trading service) but reduces for the rest of the periods/trading regimes examined. To sum up the role of commonality in liquidity is quite important under normal trading conditions and inventors require compensation for shocks in systematic liquidity.
Collateral Frameworks
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Author : Kjell G. Nyborg
language : en
Publisher: Cambridge University Press
Release Date : 2017
Collateral Frameworks written by Kjell G. Nyborg and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Business & Economics categories.
The first book-length study of the importance of collateral frameworks in monetary policy, focusing on the Eurozone and euro crisis.
Liquidity And Asset Prices
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Author : Yakov Amihud
language : en
Publisher: Now Publishers Inc
Release Date : 2006
Liquidity And Asset Prices written by Yakov Amihud and has been published by Now Publishers Inc this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Business & Economics categories.
Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Market Liquidity
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Author : Thierry Foucault
language : en
Publisher: Oxford University Press
Release Date : 2023
Market Liquidity written by Thierry Foucault and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with Capital market categories.
"The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Advances In Longitudinal Data Methods In Applied Economic Research
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Author : Nicholas Tsounis
language : en
Publisher: Springer Nature
Release Date : 2021-03-31
Advances In Longitudinal Data Methods In Applied Economic Research written by Nicholas Tsounis and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-31 with Business & Economics categories.
This volume presents new methods and applications in longitudinal data estimation methodology in applied economic. Featuring selected papers from the 2020 the International Conference on Applied Economics (ICOAE 2020) held virtually due to the corona virus pandemic, this book examines interdisciplinary topics such as financial economics, international economics, agricultural economics, marketing and management. Country specific case studies are also featured.
Perspectives On Equity Indexing
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Author : Frank J. Fabozzi, CFA
language : en
Publisher: John Wiley & Sons
Release Date : 2000-06-15
Perspectives On Equity Indexing written by Frank J. Fabozzi, CFA and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000-06-15 with Business & Economics categories.
This is the second edition of Professional Perspectives on Indexing. Contents include the active versus passive debate, Standard and Poor's U.S. equity indexes, medium and small capitalization indexing, global equity index families, investing in index mutual funds, and more.
Investments And Portfolio Performance
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Author : Edwin J. Elton
language : en
Publisher: World Scientific
Release Date : 2011
Investments And Portfolio Performance written by Edwin J. Elton and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Business & Economics categories.
This book contains the recent contributions of Edwin J. Elton and Martin J. Gruber to the field of investments. All of the articles in this book have been published in the leading finance and economic journals. Sixteen of the twenty articles have been published in the last ten years. This book supplements the earlier contributions of the editors published by MIT Press in 1999.
Understanding Global Liquidity
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Author : Sandra Eickmeier
language : en
Publisher:
Release Date : 2013
Understanding Global Liquidity written by Sandra Eickmeier and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with International finance categories.
