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Foreign institutions and the behavior of liquidity following macroeconomic announcements

Author

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  • Ryu, Doojin
  • Webb, Robert I.
  • Yu, Jinyoung

Abstract

This study uses a transaction-level dataset from the index futures market to investigate whether changes in the active participation ratio of foreign institutions explain the behavior of market liquidity following scheduled macroeconomic announcements. This ratio is positively associated with the bid-ask spread in general, but its marginal effect diminishes as the ratio increases. Announcement impacts vanish after controlling for the active participation of foreign investors.

Suggested Citation

  • Ryu, Doojin & Webb, Robert I. & Yu, Jinyoung, 2022. "Foreign institutions and the behavior of liquidity following macroeconomic announcements," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004391
    DOI: 10.1016/j.frl.2022.103239
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Bid-ask spread; Foreign institution; Macroeconomic announcement; Market liquidity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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