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Is Liquidity Symmetric? A Study of Newly Listed Internet and Technology Stocks

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Listed author(s):
  • DAVID MICHAYLUK
  • KARYN NEUHAUSER

Abstract

Imbedded in liquidity measures is an implicit assumption of symmetry. Although market microstructure models rely on this assumption, there may be directional pressure that creates differences in buy and sell liquidity. This paper develops methods of assessing asymmetric liquidity and empirically examines a sample of newly listed Internet and technology stocks that are hypothesized to be especially subject to asymmetry due to the rapid inflation and deflation of the Internet bubble. Evidence of asymmetric liquidity is observed and the level of asymmetry is found to change over time. These findings suggest that the assumption of symmetry is inconsistent with more precisely constructed market liquidity measures. Copyright (c) 2008 The Authors. Journal compilation (c) International Review of Finance Ltd. 2008.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2443.2008.00080.x
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Article provided by International Review of Finance Ltd. in its journal International Review of Finance.

Volume (Year): 8 (2008)
Issue (Month): 3-4 ()
Pages: 159-178

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Handle: RePEc:bla:irvfin:v:8:y:2008:i:3-4:p:159-178
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Cited by:

  1. Brennan, Michael J. & Chordia, Tarun & Subrahmanyam, Avanidhar & Tong, Qing, 2012. "Sell-order liquidity and the cross-section of expected stock returns," Journal of Financial Economics, Elsevier, vol. 105(3), pages 523-541.
  2. Nikhil Rastogi, 2013. "Order imbalance and returns: evidence from India," International Journal of Managerial Finance, Emerald Group Publishing, vol. 9(2), pages 92-109, March.
  3. Rajat Tayal & Susan Thomas, 2012. "Measuring and explaining the asymmetry of liquidity," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-011, Indira Gandhi Institute of Development Research, Mumbai, India.
  4. Paresh Kumar Narayan & Xinwei Zheng, 2012. "Asymmetric Information and Market Decline: Evidence from the Chinese Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 15(03), pages 1-17.

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