Abstract

http://ssrn.com/abstract=1014063
 
 

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Understanding Commonality in Liquidity Around the World


George Andrew Karolyi


Cornell University - Johnson Graduate School of Management

Kuan-Hui Lee


Seoul National University Business School

Mathijs A. Van Dijk


Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM)

July 7, 2011

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We examine how commonality in liquidity varies across countries and over time in ways related to supply determinants (funding liquidity of financial intermediaries) and demand determinants (correlated trading behavior of international and institutional investors, incentives to trade individual securities, and investor sentiment) of liquidity. Commonality in liquidity is greater in countries with and during times of high market volatility (especially, large market declines), greater presence of international investors, and more correlated trading activity. Our evidence is more reliably consistent with demand-side explanations and challenges the ability of the funding liquidity hypothesis to help us understand important aspects of financial market liquidity around the world, even during the recent financial crisis.

Number of Pages in PDF File: 64

Keywords: Commonality, Liquidity, International markets

JEL Classification: G12, G14, G15

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Date posted: September 13, 2007 ; Last revised: July 16, 2011

Suggested Citation

Karolyi, George Andrew and Lee, Kuan-Hui and Van Dijk, Mathijs A., Understanding Commonality in Liquidity Around the World (July 7, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1014063

Contact Information

George Andrew Karolyi (Contact Author)
Cornell University - Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
Kuan-Hui Lee
Seoul National University Business School ( email )
703 LG-bldg, Business School,
Seoul National Univ., 1 Kwanak-Ro, Kwanak-Gu
Seoul, 151-916
+82 2 880-6924 (Phone)
HOME PAGE: http://hosting01.snu.ac.kr/~kuanlee/
Mathijs A. Van Dijk
Erasmus University - Rotterdam School of Management ( email )
P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31 10 408 1124 (Phone)
+31 10 408 9017 (Fax)
HOME PAGE: http://mathijsavandijk.com/
Erasmus Research Institute of Management (ERIM)
P.O. Box 1738
3000 DR Rotterdam
Netherlands
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