The Divergence Of Liquidity Commonality In The Cross Section Of Stocks
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The Divergence Of Liquidity Commonality In The Cross Section Of Stocks
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Author : Avraham Kamara
language : en
Publisher:
Release Date : 2018
The Divergence Of Liquidity Commonality In The Cross Section Of Stocks written by Avraham Kamara and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This paper demonstrates that the cross-sectional variation of liquidity commonality has increased over the period 1963-2005. The divergence of systematic liquidity can be explained by patterns in institutional ownership over the sample period. We document that our findings are associated with similar patterns in systematic risk, and have significant implications for expected returns. Our analysis also indicates that the ability to diversify return volatility and liquidity shocks by holding large-cap stocks has declined. The evidence, therefore, suggests that the fragility of the US equity market to unanticipated events has increased over the past few decades.
Stock Market Liquidity
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Author : François-Serge Lhabitant
language : en
Publisher: John Wiley & Sons
Release Date : 2008-01-09
Stock Market Liquidity written by François-Serge Lhabitant 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 2008-01-09 with Business & Economics categories.
Brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares trade, etc), order based measures and price impact measures.
Commonality In Liquidity
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Author : Sudhakar Reddy Syamala
language : en
Publisher:
Release Date : 2017
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 a sample of actively traded stocks and options from emerging order-driven market, this study examines and provides satisfactory evidence for the existence of commonality in liquidity for both spot and derivatives market. For equities; the market- and industry-wide commonality remain strong even after controlling for market returns and individual firm volatility and for options after accounting for the underlying stock market liquidity and implied volatility. Compared to the stock market, options market exhibit an increased commonality in liquidity with market capitalization. Here information asymmetry acts as an important microstructure related source of commonality in liquidity across markets. The findings are robust across call and put options with negligible evidence of cross-sectional error correlation for all the liquidity measures.
Cross Section Of Stock Returns Revisited
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Author : Vinay Datar
language : en
Publisher:
Release Date : 1993
Cross Section Of Stock Returns Revisited written by Vinay Datar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Stocks categories.
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.
Uncertainty Elasticity Of Liquidity And The Associated Premium Of China S A Shares
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Author : Ping-Wen Sun
language : en
Publisher:
Release Date : 2018
Uncertainty Elasticity Of Liquidity And The Associated Premium Of China S A Shares written by Ping-Wen Sun and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
We investigate what determines a stock's uncertainty elasticity of liquidity (UEL: the change in the individual stock's liquidity given the change in the market return volatility) and whether UEL is priced for China's A-shares. We find stocks with higher UEL are associated with lower share price, smaller market capitalization, higher illiquidity ratio, lower institutional ownership, and fewer shareholders. Furthermore, those stocks have higher market risk and liquidity risk according to Acharya and Pedersen (2005)'s liquidity capital asset pricing model. From May 2004 to April 2017, our results show that the highest UEL equally-weighted decile portfolio significantly outperforms the lowest UEL equally-weighted decile portfolio by 1.19% per month and the risk adjusted UEL premium by the 6-factor (Fama and French (2015) five factor plus a momentum factor) model remains significant at 0.28% per month. Moreover, we find the UEL premium matters more for illiquid stocks with less investor attention. Finally, we find UEL fails to subsume the explanatory power of liquidity risk on cross-sectional stock returns and liquidity commonality is the most important dimension of liquidity risk for China's A-shares.
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.
Cross Listings And Liquidity Commonality Around The World
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Author : Tung Lam Dang
language : en
Publisher:
Release Date : 2016
Cross Listings And Liquidity Commonality Around The World written by Tung Lam Dang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
In this paper, we investigate the effects of international cross-listings on commonality in liquidity. We find that cross-listings have asymmetric effects on cross-listed stocks' liquidity commonality that include reducing the stocks' liquidity commonality with the local market and increasing the stocks' liquidity commonality with the host market. We also find that the negative impact of cross-listings on home liquidity commonality is more pronounced for stocks from countries with high market segmentation, an opaque information environment, and a poor institutional infrastructure. These results suggest that cross-listings reduce the vulnerability of stocks' liquidity to aggregate liquidity shocks in the local market.
Idiosyncratic Return Volatility In The Cross Section Of Stocks
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Author : Namho Kang
language : en
Publisher:
Release Date : 2011
Idiosyncratic Return Volatility In The Cross Section Of Stocks written by Namho Kang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Stocks categories.
This paper uncovers the changes in the cross-sectional distribution of idiosyncratic volatility of stocks over the period 1963--2008. The contribution of the top decile to the total market idiosyncratic volatility increased, while the contribution of the bottom decile decreased. We introduce a simple theoretical model showing that larger capital of Long/Short-Equity funds further exacerbates large idiosyncratic shocks but attenuates small idiosyncratic shocks. This effect is stronger for more illiquid stocks. Time-series and cross-sectional results are consistent with the predictions of the model. The results are robust to industry affiliation, stock liquidity, firm size, firm leverage, as well as sign of price change. These findings highlight the roll of hedge funds and other institutional investors in explaining the dynamics of extreme realizations in the cross-section of returns.
The Volatility Of Liquidity And Expected Stock Returns
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Author : Ferhat Akbas
language : en
Publisher:
Release Date : 2013
The Volatility Of Liquidity And Expected Stock Returns written by Ferhat Akbas 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.
The pricing of total liquidity risk is studied in the cross-section of stock returns. The study suggests that there is a positive relation between total volatility of liquidity and expected returns. Our measure of liquidity is based on Amihud (2002) and its volatility is measured using daily data. Furthermore, we document that total volatility of liquidity is priced in the presence of systematic liquidity risk: the covariance of stock returns with aggregate liquidity, the covariance of stock liquidity with aggregate liquidity, and the covariance of stock liquidity with the market return. The separate pricing of total volatility of liquidity indicates that idiosyncratic liquidity risk is important in the cross section of returns. This result is puzzling in light of Acharya and Pedersen (2005) who develop a model in which only systematic liquidity risk affects returns. The positive correlation between the volatility of liquidity and expected returns suggests that risk averse investors require a risk premium for holding stocks that have high variation in liquidity. Higher variation in liquidity implies that a stock may become illiquid with higher probability at a time when it is traded. This is important for investors who face an immediate liquidity need and are not able to wait for periods of high liquidity to sell. The electronic version of this dissertation is accessible from http://hdl.handle.net/1969.1/150946