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The information content of market liquidity: An empirical analysis of liquidity at the Oslo Stock Exchange

Listed author(s):
  • Skjeltorp, Johannes

    (Norges Bank)

  • Ødegaard, Bernt Arne

    ()

    (University of Stavanger)

We investigate the information content of aggregate stock market liquidity and ask whether it may be a useful realtime indicator, both for financial stress, and real economic activity in Norway. We describe the development in a set of liquidity proxies at the Oslo Stock Exchange (OSE) for the period 1980-2008, with particular focus on crisis period 2007 through 2008, showing how market liquidity and trading activity changed for the whole market as well as for individual industry sectors. We also evaluate the predictive power of market liquidity for economic growth both in-sample and out-of-sample.

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File URL: http://www1.uis.no/ansatt/odegaard/uis_wps_econ_fin/uis_wps_2009_35_skjeltorp_odegaard.pdf
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Paper provided by University of Stavanger in its series UiS Working Papers in Economics and Finance with number 2009/35.

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Length: 31 pages
Date of creation: 03 Dec 2009
Handle: RePEc:hhs:stavef:2009_035
Contact details of provider: Postal:
University of Stavanger, NO-4036 Stavanger, Norway

Web page: http://www.uis.no/research/economics_and_finance

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  1. Næs, Randi & Skjeltorp, Johannes & Ødegaard, Bernt Arne, 2009. "What factors affect the Oslo Stock Exchange?," UiS Working Papers in Economics and Finance 2009/33, University of Stavanger.
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  11. Randi Næs & Johannes A. Skjeltorp & Bernt Arne Ødegaard, 2008. "Liquidity at the Oslo Stock Exchange," Working Paper 2008/09, Norges Bank.
  12. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
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  23. Gibson, Rajna & Mougeot, Nicolas, 2004. "The pricing of systematic liquidity risk: Empirical evidence from the US stock market," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 157-178, January.
  24. McCracken, Michael W., 2007. "Asymptotics for out of sample tests of Granger causality," Journal of Econometrics, Elsevier, vol. 140(2), pages 719-752, October.
  25. Arturo Estrella & Mary R. Trubin, 2006. "The yield curve as a leading indicator: some practical issues," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Jul).
  26. Goyenko, Ruslan Y. & Holden, Craig W. & Trzcinka, Charles A., 2009. "Do liquidity measures measure liquidity?," Journal of Financial Economics, Elsevier, vol. 92(2), pages 153-181, May.
  27. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
  28. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  29. Vassalou, Maria, 2003. "News related to future GDP growth as a risk factor in equity returns," Journal of Financial Economics, Elsevier, vol. 68(1), pages 47-73, April.
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