Advanced Search
MyIDEAS: Login

Learning from Prices, Liquidity Spillovers, and Market Segmentation

Contents:

Author Info

  • Giovanni Cespa

    () (Cass Business School, CSEF, and CEPR)

  • Thierry Focault

    (HEC, School of Management, Paris, GREGHEC, and CEPR)

Registered author(s):

    Abstract

    We describe a new mechanism that explains the transmission of liquidity shocks from one security to another (“liquidity spillovers”). Dealers use prices of other securities as a source of information. As prices of less liquid securities convey less precise information, a drop in liquidity for one security raises the uncertainty for dealers in other securities, thereby affecting their liquidity. The direction of liquidity spillovers is positive if the fraction of dealers with price information on other securities is high enough. Otherwise liquidity spillovers can be negative. For some parameters, the value of price information increases with the number of dealers obtaining this information. In this case, related securities can appear segmented, even if the cost of price information is small.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.csef.it/WP/wp284.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 284.

    as in new window
    Length:
    Date of creation: 18 Apr 2011
    Date of revision:
    Handle: RePEc:sef:csefwp:284

    Contact details of provider:
    Postal: I-80126 Napoli
    Phone: +39 081 - 675372
    Fax: +39 081 - 675372
    Email:
    Web page: http://www.csef.it/
    More information through EDIRC

    Related research

    Keywords: Liquidity spillovers; Liquidity Risk; Contagion; Value of price information; Transparency; Colocation;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:sef:csefwp:284

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.