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Intraday liquidity dynamics and news releases around price jumps: Evidence from the DJIA stocks

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  • Boudt, Kris
  • Petitjean, Mikael

Abstract

We study the dynamics of liquidity and news releases around jumps by identifying their intraday timing for the Dow Jones Industrial Average index constituents. Jumps are found to coincide with a significant increase in trading costs and demand for immediacy, amplified by the release of news. Liquidity supply remains nevertheless high and there is strong evidence of resilience. Liquidity shocks in the effective spread and the number of trades are the key drivers behind the occurrence of a jump. Order imbalance appears to be the most informative liquidity variable with respect to price discovery, especially after the arrival of news.

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  • Boudt, Kris & Petitjean, Mikael, 2014. "Intraday liquidity dynamics and news releases around price jumps: Evidence from the DJIA stocks," Journal of Financial Markets, Elsevier, vol. 17(C), pages 121-149.
    • Handle: RePEc:eee:finmar:v:17:y:2014:i:c:p:121-149
    DOI: 10.1016/j.finmar.2013.05.004
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    More about this item

    Keywords

    High-frequency data; Liquidity; News; Price jumps; Volatility;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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