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Liquidity Spillover in International Stock Markets through Distinct Time Scales

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  • Marcelo Brutti Righi
  • Kelmara Mendes Vieira

Abstract

This paper identifies liquidity spillovers through different time scales based on a wavelet multiscaling method. We decompose daily data from U.S., British, Brazilian and Hong Kong stock markets indices in order to calculate the scale correlation between their illiquidities. The sample is divided in order to consider non-crisis, sub-prime crisis and Eurozone crisis. We find that there are changes in correlations of distinct scales and different periods. Association in finest scales is smaller than in coarse scales. There is a rise on associations in periods of crisis. In frequencies, there is predominance for significant distinctions involving the coarsest scale, while for crises periods there is predominance for distinctions on the finest scale.

Suggested Citation

  • Marcelo Brutti Righi & Kelmara Mendes Vieira, 2014. "Liquidity Spillover in International Stock Markets through Distinct Time Scales," PLOS ONE, Public Library of Science, vol. 9(1), pages 1-10, January.
    • Handle: RePEc:plo:pone00:0086134
    DOI: 10.1371/journal.pone.0086134
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    References listed on IDEAS

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    1. Brennan, Michael J. & Subrahmanyam, Avanidhar, 1996. "Market microstructure and asset pricing: On the compensation for illiquidity in stock returns," Journal of Financial Economics, Elsevier, vol. 41(3), pages 441-464, July.
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    Cited by:

    1. Linas Jurksas & Deimante Teresiene & Rasa Kanapickiene, 2021. "Liquidity Spill-Overs in Sovereign Bond Market: An Intra-Day Study of Trade Shocks in Calm and Stressful Market Conditions," Economies, MDPI, vol. 9(1), pages 1-22, March.
    2. Liu, Xueyong & An, Haizhong & Huang, Shupei & Wen, Shaobo, 2017. "The evolution of spillover effects between oil and stock markets across multi-scales using a wavelet-based GARCH–BEKK model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 465(C), pages 374-383.
    3. Efstathios Panayi & Gareth Peters & Ioannis Kosmidis, 2014. "Liquidity commonality does not imply liquidity resilience commonality: A functional characterisation for ultra-high frequency cross-sectional LOB data," Papers 1406.5486, arXiv.org.

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