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How Jumps Affect Liquidity? The Evidence from Poland

Author

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  • Barbara Bedowska-Sojka

    (Poznan University of Economics)

Abstract

We examine the changes in liquidity measures around the price jumps detected in intraday returns. The sample consists of 5-minute returns from the most liquid stocks quoted on the Warsaw Stock Exchange. Within an event-study we show that the appearance of the jumps has a two-fold impact on the market liquidity. On the one hand, jumps coincide with the increase in the transaction costs measured by the quoted spread, and on the other hand jumps are accompanied by the increase in the trading quantity measured by trading volume or the number of trades. The price jumps also coincide with the increase in the Amihud’s illiquidity measure. All these effects are strong but short-lived, which constitutes the evidence for the market resiliency. Jumps are a result of the market inability to absorb huge orders without significant changes in the prices.

Suggested Citation

  • Barbara Bedowska-Sojka, 2017. "How Jumps Affect Liquidity? The Evidence from Poland," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(1), pages 39-52, March.
    • Handle: RePEc:fau:fauart:v:67:y:2017:i:1:p:39-52
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    Citations

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    Cited by:

    1. Barbara Będowska-Sójka, 2021. "Is liquidity wasted? The zero-returns on the Warsaw Stock Exchange," Annals of Operations Research, Springer, vol. 297(1), pages 37-51, February.
    2. Barbara Będowska-Sójka, 2013. "Macroeconomic News Effects on the Stock Markets in Intraday Data," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 5(4), pages 249-269, December.
    3. Barbara Będowska-Sójka, 2016. "Liquidity Dynamics Around Jumps: The Evidence from the Warsaw Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(12), pages 2740-2755, December.

    More about this item

    Keywords

    liquidity; jumps; intraday data; event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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