Liquidity Commonality Beyond Best Prices
Abstract
Previous market microstructure research focuses on commonality in liquidity at the inside spread. However, liquidity at the inside spread only determines the systematic liquidity risk of small and medium trades. We study commonality in displayed liquidity beyond best prices, which determines the systematic liquidity risk of large trades. We show that it is much larger than commonality at the inside spread. The deeper we look into the order book, the higher is the level of commonality. In addition, it rises in the morning and when markets fall. 2008 The Southern Finance Association and the Southwestern Finance Association.Download Info
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Bibliographic Info
Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 31 (2008)
Issue (Month): 1 ()
Pages: 25-40
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Web page: http://www.southwesternfinance.org/
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Sergio Mayordomo & Juan Ignacio Peña & María Rodríguez-Moreno, 2012. "Liquidity Commonalities in the Corporate CDS Market around the 2007-2012 Financial Crisis," Faculty Working Papers 23/12, School of Economics and Business Administration, University of Navarra.
- Björn Hagströmer & Richard G. Anderson & Jane M. Binner & Birger Nilsson, 2009.
"Dynamics in systematic liquidity,"
Working Papers
2009-025, Federal Reserve Bank of St. Louis.
- Hagströmer, Björn & Anderson, Richard G. & Binner, Jane & Nilsson, Birger, 2009. "Dynamics in Systematic Liquidity," Working Papers 2009:7, Lund University, Department of Economics.
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