Please use this identifier to cite or link to this item: http://hdl.handle.net/2445/174958
Title: Uncovering the time-varying relationship between commonality in liquidity and volatility
Author: Chuliá Soler, Helena
Koser, Christoph
Uribe Gil, Jorge Mario
Keywords: Liquiditat (Economia)
Mercat financer
Crisis financeres
Anàlisi de variància
Liquidity (Economics)
Financial market
Financial crises
Analysis of variance
Issue Date: May-2020
Publisher: Elsevier
Abstract: This study examines the dynamic linkages between commonality in liquidity in international stock markets and market volatility. Using a recently proposed liquidity measure as input in a variance decomposition exercise, we show that innovations to liquidity in most markets are induced predominately by inter-market innovations. We also find that commonality in liquidity peaks immediately after large market downturns, coinciding with periods of crisis. The results from a dynamic Granger causality test indicate that the relationship between commonality in liquidity and market volatility is bi-directional and time-varying. We show that while volatility Granger-causes commonality in liquidity throughout the entire sample period, market volatility is enhanced by commonality in liquidity only in sub-periods. Our results are helpful for practitioners and policy makers.
Note: Versió postprint del document publicat a: https://doi.org/10.1016/j.irfa.2020.101466
It is part of: International Review of Financial Analysis, 2020, vol. 69, num. 101466, p. 1-9
URI: http://hdl.handle.net/2445/174958
Related resource: https://doi.org/10.1016/j.irfa.2020.101466
ISSN: 1057-5219
Appears in Collections:Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

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