The Determinants and Pricing of Liquidity Commonality around the World

This paper examines the determinants and pricing of liquidity commonality using intraday data from 39 markets over 15 years. We show that liquidity commonality is driven by both market-level and firm-level factors. Liquidity commonality is higher in weaker and more-volatile economic and financial environments, in areas with poor investor protection, and in opaque information environments. Liquidity commonality is also affected by cultural and behavioral factors, including individualism and uncertainty avoidance. Moreover, we find that liquidity commonality is priced in the world’s stock markets and that the pricing effect is stronger in developed markets.

Keywords: Liquidity Commonality; Pricing of Liquidity; International Financial Markets

JEL Classification: G11, G12, G15

Suggested Citation: Suggested Citation

Moshirian, Fariborz and Qian, Xiaolin and Wee, Claudia Koon Ghee and Zhang, Bohui, The Determinants and Pricing of Liquidity Commonality around the World (December 10, 2016). Journal of Financial Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2899349