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

  • 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
Date of revision:
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. Todd E. Clark & Michael McCracken, 1999. "Tests of Equal Forecast Accuracy and Encompassing for Nested Models," Computing in Economics and Finance 1999 1241, Society for Computational Economics.
  2. repec:oup:rfinst:v:24:y:2011:i:11:p:3688-3730 is not listed on IDEAS
  3. 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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  11. Ben S. Bernanke, 1990. "On the predictive power of interest rates and interest rate spreads," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 51-68.
  12. Vladimir Yankov & Egon Zakrajsek & Simon Gilchrist, 2009. "Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets," 2009 Meeting Papers 514, Society for Economic Dynamics.
  13. Estrella, Arturo & Hardouvelis, Gikas A, 1991. " The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-76, June.
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  15. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2010. "What Does Equity Sector Orderflow Tell Us about the Economy?," NBER Working Papers 16534, National Bureau of Economic Research, Inc.
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  17. Goyenko, Ruslan Y. & Ukhov, Andrey D., 2009. "Stock and Bond Market Liquidity: A Long-Run Empirical Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(01), pages 189-212, February.
  18. Albuquerque, Rui & de Francisco, Eva & Marques, Luis, 2006. "Marketwide Private Information in Stocks: Forecasting Currency Returns," CEPR Discussion Papers 5604, C.E.P.R. Discussion Papers.
  19. Harvey, Campbell R., 1988. "The real term structure and consumption growth," Journal of Financial Economics, Elsevier, vol. 22(2), pages 305-333, December.
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