# name
Uncovering the time-varying relationship between commonality in liquidity and volatility [WP]

# metadata.dc.description.abstract[].value
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.

# metadata.dc.publisher[].value
Universitat de Barcelona. Facultat d'Economia i Empresa

# metadata.dc.rights[].value
cc-by-nc-nd, (c) Chuliá Soler et al., 2019

# metadata.dc.source[].value
Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

# metadata.dc.title[].value
Uncovering the time-varying relationship between commonality in liquidity and volatility [WP]