Comovement, Liquidity and Asymmetries

Journal of Investment Management (JOIM), Forthcoming

38 Pages Posted: 28 Dec 2019

See all articles by James X. Xiong

James X. Xiong

Morningstar Investment Management

Date Written: November 29, 2019

Abstract

Substantially increased institutional investing and index trading in the U.S. stock market have a meaningful impact on the mechanical relationship between return co-movement and liquidity, which can be quantified by a power law function and explained by a liquidity supply model. Three well-documented asymmetries (asymmetric volume, asymmetry in non-market volatility, and positive skewness for individual stocks) are disappearing with increased basket trading, however, asymmetric correlation survives.

Keywords: Co-movement, Liquidity, Asymmetric Volume, Asymmetric Correlation, Index Trading

Suggested Citation

Xiong, James X., Comovement, Liquidity and Asymmetries (November 29, 2019). Journal of Investment Management (JOIM), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3495581 or http://dx.doi.org/10.2139/ssrn.3495581

James X. Xiong (Contact Author)

Morningstar Investment Management ( email )

22 West Washington Street
Chicago, IL 60602
United States

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