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The liquidity of energy stocks

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  • Sklavos, Konstantinos
  • Dam, Lammertjan
  • Scholtens, Bert

Abstract

This study investigates the dynamics of stock market liquidity in the energy industry in the US for 130 firms for the period 2006–2011. We use a (structural) vector autoregression approach to model the simultaneous relationships between three liquidity measures, namely turnover, price impact and spread. In addition, we account for oil prices in this model. The liquidity measures exhibit a persistent (highly autocorrelated) pattern. The intensity of trading appears to be relevant for the interrelationships of the liquidity measures. Stocks that are traded more often seem to be less sensitive to changes in liquidity. The main contribution of this study is that we introduce and test a specific causality pattern between trading activity, price impact, and spreads of energy stocks. This causality pattern is stronger during illiquid periods, which makes these periods much more risky.

Suggested Citation

  • Sklavos, Konstantinos & Dam, Lammertjan & Scholtens, Bert, 2013. "The liquidity of energy stocks," Energy Economics, Elsevier, vol. 38(C), pages 168-175.
  • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:168-175 DOI: 10.1016/j.eneco.2013.02.015
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    Cited by:

    1. Shin S. Ikeda, 2015. "Illiquidity in the Japanese Day-Ahead Electricity Market," GRIPS Discussion Papers 15-04, National Graduate Institute for Policy Studies.
    2. Ben Ammar, Semir & Eling, Martin, 2015. "Common risk factors of infrastructure investments," Energy Economics, Elsevier, pages 257-273.
    3. repec:eee:reveco:v:50:y:2017:i:c:p:136-174 is not listed on IDEAS
    4. Efstathios Panayi & Gareth Peters & Ioannis Kosmidis, 2014. "Liquidity commonality does not imply liquidity resilience commonality: A functional characterisation for ultra-high frequency cross-sectional LOB data," Papers 1406.5486, arXiv.org.
    5. Sabet, Amir H. & Heaney, Richard, 2015. "Bid-ask spread, information asymmetry and acquisition of oil and gas assets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 77-84.

    More about this item

    Keywords

    Liquidity; Energy stocks; Oil returns; US;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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