Abstract

http://ssrn.com/abstract=289219
 
 

References (65)



 
 

Citations (149)



 


 



An Empirical Analysis of Stock and Bond Market Liquidity


Tarun Chordia


Emory University - Department of Finance

Asani Sarkar


Federal Reserve Bank of New York

Avanidhar Subrahmanyam


University of California, Los Angeles (UCLA) - Finance Area; Centre for International Finance and Regulation (CIFR)

March 2003

FRB NY Staff Report No. 164

Abstract:     
We study the joint time-series of daily liquidity in government bond and stock markets over the period 1991 to 1998. Innovations in liquidity are positively and significantly correlated across stock and bond markets. Further, order imbalances in the stock market impact bond and stock liquidity, even after controlling for order imbalances in the bond market. Both results suggest the existence of a common liquidity factor in stock and bond markets. We consider monetary conditions and mutual fund flows as sources of order flow and as primitive determinants of liquidity. Monetary expansion enhances stock market liquidity during crises. U.S. government bond funds see higher inflows and equity funds see higher outflows during financial crises, and these flows are associated with decreased liquidity in stock and bond markets. Our results establish a link between "macro" liquidity, or money flows, and "micro" or transactions liquidity.

Number of Pages in PDF File: 61

JEL Classification: G10, G14, G23, E52

working papers series





Download This Paper

Date posted: November 1, 2001  

Suggested Citation

Chordia, Tarun and Sarkar, Asani and Subrahmanyam, Avanidhar, An Empirical Analysis of Stock and Bond Market Liquidity (March 2003). FRB NY Staff Report No. 164. Available at SSRN: http://ssrn.com/abstract=289219 or http://dx.doi.org/10.2139/ssrn.289219

Contact Information

Tarun Chordia
Emory University - Department of Finance ( email )
Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)
Asani Sarkar (Contact Author)
Federal Reserve Bank of New York ( email )
Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/sarkar/pub.html
Avanidhar Subrahmanyam
University of California, Los Angeles (UCLA) - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)
Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Feedback to SSRN


Paper statistics
Abstract Views: 10,001
Downloads: 2,962
Download Rank: 1,783
References:  65
Citations:  149

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.360 seconds