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Analysis of the Dynamic Relationship between Liquidityproxies and returns on French CAC 40 index

Author

Listed:
  • Ayad Assoil

    (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier)

  • Ndéné Ka

    (UADB - Université Alioune Diop de Bambey)

  • Jules Sadefo-Kamdem

    (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier)

Abstract

The aim of this paper is to analyze the dynamic evolution of six liquidity proxies ontime, and to find their causality with the French CAC 40 stock market index returns, overthe period from January 2007 to December 2018. For that, we use a vector autoregressiveapproach and the impulse response function, to do causality test between the CAC 40 index returns and six differents liquidity proxies. Empirical results suggest a significantshort-term relationship between the returns and the liquidity. As for Granger's causalitytest, the results reveal that there is unidirectional causality running from equity returnsto liquidity.

Suggested Citation

  • Ayad Assoil & Ndéné Ka & Jules Sadefo-Kamdem, 2021. "Analysis of the Dynamic Relationship between Liquidityproxies and returns on French CAC 40 index," Post-Print hal-03282991, HAL.
    • Handle: RePEc:hal:journl:hal-03282991
    DOI: 10.1007/s43546-021-00129-7
    Note: View the original document on HAL open archive server: https://hal.science/hal-03282991v2
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    More about this item

    Keywords

    Impulse response function; Granger causality; Liquidity risk; Market risk; VAR model; CAC 40 Market.;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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