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The determinants and pricing of liquidity commonality around the world

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  • Moshirian, Fariborz
  • Qian, Xiaolin
  • Wee, Claudia Koon Ghee
  • Zhang, Bohui

Abstract

In this paper, we examine the determinants and pricing of liquidity commonality using intraday data from 39 markets over 15 years. We show that liquidity commonality is driven by both market-level and firm-level factors. Liquidity commonality is higher in weaker and more-volatile economic and financial environments, in areas with poor investor protection, and in opaque information environments. Liquidity commonality is also affected by cultural and behavioral factors, including individualism and uncertainty avoidance. Moreover, we find that liquidity commonality is priced in the world's stock markets and that the pricing effect is stronger in developed markets.

Suggested Citation

  • Moshirian, Fariborz & Qian, Xiaolin & Wee, Claudia Koon Ghee & Zhang, Bohui, 2017. "The determinants and pricing of liquidity commonality around the world," Journal of Financial Markets, Elsevier, vol. 33(C), pages 22-41.
  • Handle: RePEc:eee:finmar:v:33:y:2017:i:c:p:22-41
    DOI: 10.1016/j.finmar.2017.02.004
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    6. Debata, Byomakesh & Dash, Saumya Ranjan & Mahakud, Jitendra, 2018. "Investor sentiment and emerging stock market liquidity," Finance Research Letters, Elsevier, vol. 26(C), pages 15-31.
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    8. Syeda Hina Zaidi & Nousheen Tariq Bhutta, 2021. "Liquidity Synchronization and Asset Valuation in Selected Emerging Asian Economies," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(6), pages 488-500, June.
    9. Byomakesh Debata & Jitendra Mahakud, 2018. "Economic policy uncertainty and stock market liquidity: Does financial crisis make any difference?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 10(1), pages 112-135, April.
    10. Anagnostidis, Panagiotis & Fontaine, Patrice, 2020. "Liquidity commonality and high frequency trading: Evidence from the French stock market," International Review of Financial Analysis, Elsevier, vol. 69(C).
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    More about this item

    Keywords

    Liquidity commonality; Pricing of liquidity; International financial markets;
    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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