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Collectivism and commonality in liquidity

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  • Saad, Mohsen
  • Samet, Anis

Abstract

In this paper, we explore the link between culture, measured by collectivism, and commonality in liquidity for 51 countries over the period 1985 to 2012. We provide evidence that commonality in liquidity is higher for stocks that trade in collectivist countries, after controlling for supply-side and demand-side determinants of liquidity as well as a host of country- and firm-level variables. The documented relation is shown to be moderated by country-level variables such as media penetration, trust, and rule of law. The impact of collectivism is statistically and economically significant. Our findings are robust to: alternative proxies for collectivism, sample composition, endogeneity concerns, and alternative estimation methodologies. We finally observe that collectivism has a stronger influence on co-movements between stock and market liquidity when both are simultaneously decreasing.

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  • Saad, Mohsen & Samet, Anis, 2020. "Collectivism and commonality in liquidity," Journal of Business Research, Elsevier, vol. 116(C), pages 137-162.
  • Handle: RePEc:eee:jbrese:v:116:y:2020:i:c:p:137-162
    DOI: 10.1016/j.jbusres.2020.04.012
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    More about this item

    Keywords

    Culture; Collectivism; Commonality in liquidity; International markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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