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Stock Market Liquidity and Corporate Profit Growth

10 Pages Posted: 1 Aug 2013 Last revised: 19 Aug 2013

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: July 31, 2013

Abstract

This study examines how aggregate corporate profit growth (CP) dynamically influences liquidity in the stock market using NYSE share turnover (STO) as a proxy. The VAR results from fitting quarterly data from 1951Q4 to 2012Q4 show that STO has a significant jump immediately in the first quarter following the shock to CP then drops and stays at the zero territory after the first quarter. The Granger-causality tests indicate that CP and STO Granger-cause each other. CP forecasts 3.5% to 4% of the STO variability at the two- and eight-quarter horizons, respectively.

Keywords: liquidity, liquidity shocks, share turnover, corporate profit growth

JEL Classification: G12, G14

Suggested Citation

Sum, Vichet, Stock Market Liquidity and Corporate Profit Growth (July 31, 2013). Available at SSRN: https://ssrn.com/abstract=2304487 or http://dx.doi.org/10.2139/ssrn.2304487

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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