Does screen trading weather the weather? A note on cloudy skies, liquidity, and computerized stock markets
AbstractThis paper tests for the presence of a weather effect on liquidity in a screen-based electronic stock market. The Exchange Liquidity Measure XLM enables us to separate the effect of cloudy skies on liquidity provided by market makers from this effect on liquidity naturally in the market. The empirical evidence suggests that cloudy skies correspond with high natural liquidity levels and low liquidity injected by market makers. This result is consistent with findings for floor-based stock trading and with the hypothesis that market makers add less value in markets with high natural liquidity.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 19 (2010)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620166
Weather effect Screen trading Liquidity Anonymous stock market Market maker;
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