Download This PaperLiquid Co-Illiquidity Management
51 Pages Posted: 19 Apr 2021 Last revised: 9 Dec 2021
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Liquid Co-Illiquidity Management
Date Written: April 14, 2021
Abstract
We study the link between illiquidity and co-movement in illiquidity and the way asset managers trade off illiquidity and co-illiquidity in their portfolio allocation decision. By exploring two experiments – the 2005 SHO Regulation and the 2008 short selling ban – we document that in the face of sudden illiquidity shocks, short-term investors are willing to accept higher portfolio co-illiquidity to circumvent an increase in their holdings’ illiquidity.
Keywords: Short-sales constraints, liquidity, commonality
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation
Massimo Massa
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