The Co-Movements of Stock, Bond, and CDS Illiquidity Before, During and After the Global Financial Crisis

50 Pages Posted: 28 Dec 2018 Last revised: 18 Sep 2019

See all articles by Xinjie Wang

Xinjie Wang

Southern University of Science and Technology

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics

Zhaodong Zhong

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: December 10, 2018

Abstract

Using both market-wide and firm-level illiquidity measures of the stock, bond, and CDS markets, we find that the co-movements of illiquidity across markets increase significantly during the recent global financial crisis. Moreover, the degree of co-movements remains significantly higher in the post-crisis period and regulatory period than in the pre-crisis period. Specifically, the distribution of firm-level co-movements is notably different before and after the crisis (e.g., a much larger portion of firms with positive pairwise correlations between illiquidity measures in the post-crisis period than in the pre-crisis period). Our results provide suggestive evidence of the effects of financial crisis and the subsequent post-crisis regulations on the co-movements of illiquidity across markets.

Suggested Citation

Wang, Xinjie and Wu, Yangru and Zhong, Zhaodong, The Co-Movements of Stock, Bond, and CDS Illiquidity Before, During and After the Global Financial Crisis (December 10, 2018). Available at SSRN: https://ssrn.com/abstract=3299766 or http://dx.doi.org/10.2139/ssrn.3299766

Xinjie Wang (Contact Author)

Southern University of Science and Technology ( email )

1088 Xueyuan Blvd
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

Yangru Wu

Rutgers University, Newark - School of Business - Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-1146 (Phone)
973-353-1006 (Fax)

HOME PAGE: http://andromeda.rutgers.edu/~yangruwu

Zhaodong Zhong

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

Department of Finance, Rutgers Business School
100 Rockafeller Road
Piscataway, NJ 08854
United States

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