51 Pages Posted: 22 Sep 2016 Last revised: 13 Oct 2016
Date Written: September 20, 2016
This study measures the effect of U.S. Federal Government policy uncertainty on U.S. financial market liquidity. From October 1 to 16, 2013, the Government shut down. We argue that the onset and duration of the shutdown were uncertain, and view the shutdown as a liquidity-unrelated shock that increased Government policy uncertainty. During the shutdown, liquidity and price efficiency of U.S. firms significantly deteriorated relative to a control period and to control samples of foreign firms and firms with international exposure. Our results build on recent studies that argue that Government policy uncertainty has a substantial impact on financial markets.
Keywords: Policy Uncertainty, Stock Liquidity, U.S. Government
JEL Classification: G12, G14, E61, E65
Suggested Citation: Suggested Citation
Ball, Ryan T. and Nagar, Venky and Schoenfeld, Jordan, Market Liquidity and the U.S. Government Shutdown of 2013 (September 20, 2016). Ross School of Business Paper No. 1333. Available at SSRN: https://ssrn.com/abstract=2841442 or http://dx.doi.org/10.2139/ssrn.2841442