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The influence of oil price uncertainty on stock liquidity

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  • Qin Zhang
  • Jin Boon Wong

Abstract

Using high‐frequency intraday data, this study provides strong empirical evidence that elevated oil price uncertainty has a significant and negative influence on stock liquidity. More specifically, the results suggest that large oil‐related corporations are most affected, followed by small‐listed firms more generally. Further analysis reveals that liquidity providers widen the bid‐ask spreads to protect themselves during periods of high oil price uncertainty for large‐listed firms, particularly those in the oil industry. These findings are robust to various measures of oil price uncertainty, different market conditions, structural break analysis and show the influence of oil price movements extends to stock liquidity.

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  • Qin Zhang & Jin Boon Wong, 2023. "The influence of oil price uncertainty on stock liquidity," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(2), pages 141-167, February.
    • Handle: RePEc:wly:jfutmk:v:43:y:2023:i:2:p:141-167
    DOI: 10.1002/fut.22383
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    2. Wong, Jin Boon & Zhang, Qin, 2024. "ESG reputation risks, cash holdings, and payout policies," Finance Research Letters, Elsevier, vol. 59(C).
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