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On the stock market liquidity and the business cycle: A multi country approach

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  • Galariotis, Emilios
  • Giouvris, Evangelos

Abstract

We provide original results on national and global stock market liquidity and its interaction with macro-economic variables for six of the G7 economies, namely: Canada, France, Germany, Italy, Japan and UK, building on the methodology and on the US evidence by Naes et al. (2011). Using a number of additional tests, we find that different markets do not behave in a uniform manner. National liquidity has diminished ability in Granger causing macroeconomic variables for our sample countries, and in additional tests the same holds for an extended US sample, contrary to Naes et al. As regards global liquidity there is a two-way causality with macroeconomic indicators for the six nations in our sample while for the US there is no causality in either direction. We also show that there is no superior information in small firm liquidity in Granger causing macroeconomic variables even for the US in contrast to the sample period employed by Naes et al. implying an unstable relationship over time for the US.

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  • Galariotis, Emilios & Giouvris, Evangelos, 2015. "On the stock market liquidity and the business cycle: A multi country approach," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 44-69.
    • Handle: RePEc:eee:finana:v:38:y:2015:i:c:p:44-69
    DOI: 10.1016/j.irfa.2015.01.009
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    Cited by:

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    3. Kaul, Aditya & Kayacetin, Nuri Volkan, 2017. "Flight-to-quality, economic fundamentals, and stock returns," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 162-175.
    4. Ødegaard, Bernt Arne, 2016. "Bond Liquidity at the Oslo Stock Exchange," UiS Working Papers in Economics and Finance 2016/16, University of Stavanger.
    5. Kroot, Jan & Giouvris, Evangelos, 2016. "Dutch mortgages: Impact of the crisis on probability of default," Finance Research Letters, Elsevier, vol. 18(C), pages 205-217.
    6. Si, Deng-Kui & Liu, Xi-Hua & Kong, Xianli, 2019. "The comovement and causality between stock market cycle and business cycle in China: Evidence from a wavelet analysis," Economic Modelling, Elsevier, vol. 83(C), pages 17-30.
    7. Rogers Ochenge & Peter Muriu & Rose Ngugi, 2021. "Macroeconomic Conditions and Stock Market Liquidity in Kenya," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(12), pages 1-47, December.
    8. Kosmidou, Kyriaki & Kousenidis, Dimitrios & Ladas, Anestis & Negkakis, Christos, 2020. "Regulation of capital flows: Effects on liquidity and the role of financial reporting quality," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 86-97.
    9. Baker, H. Kent & Kumar, Satish & Goyal, Kirti & Sharma, Anuj, 2021. "International review of financial analysis: A retrospective evaluation between 1992 and 2020," International Review of Financial Analysis, Elsevier, vol. 78(C).
    10. Husaini Said & Evangelos Giouvris, 2019. "Oil, the Baltic Dry index, market (il)liquidity and business cycles: evidence from net oil-exporting/oil-importing countries," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 33(4), pages 349-416, December.

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    More about this item

    Keywords

    Market liquidity; Real economy; Economic indicators; Granger causality panel data; Dumitrescu Hurlin;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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