The Cross-Section of Daily Variation in Liquidity

47 Pages Posted: 12 Mar 2001

See all articles by Tarun Chordia

Tarun Chordia

Emory University - Department of Finance

Lakshmanan Shivakumar

London Business School

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Date Written: May 11, 2001

Abstract

In this paper, we analyze cross-sectional heterogeneity in the time-series variation of liquidity. Average daily changes in liquidity exhibit significant heterogeneity in the cross-section; the liquidity of small firms varies more on a daily basis than that of large firms. A steady increase in aggregate market liquidity over the past decade is more strongly manifest in large firms than in small firms. We investigate cross-sectional differences in the resilience of a firm?s liquidity to information shocks. We use the sensitivity of stock liquidity to absolute stock returns as an inverse measure of this resilience, and find that the measure exhibits considerable cross-sectional variation. Firm size, return volatility, institutional holdings, and volume are all significant cross-sectional determinants of this measure.

Suggested Citation

Chordia, Tarun and Shivakumar, Lakshmanan and Subrahmanyam, Avanidhar, The Cross-Section of Daily Variation in Liquidity (May 11, 2001). London Business School Accounting Subject Area No. 012. Available at SSRN: https://ssrn.com/abstract=263051 or http://dx.doi.org/10.2139/ssrn.263051

Tarun Chordia (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Lakshmanan Shivakumar

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom
+44 20 7000 8115 (Phone)
+44 20 7000 8101 (Fax)

HOME PAGE: http://faculty.london.edu/lshivakumar/

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)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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