Liquid Co-Illiquidity Management

51 Pages Posted: 19 Apr 2021 Last revised: 9 Dec 2021

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Aleksandra Rzeźnik

York University - Schulich School of Business

Soeren Hvidkjaer

Copenhagen Business School

Multiple version iconThere are 4 versions of this paper

Date Written: April 14, 2021


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

Massa, Massimo and Rzeźnik, Aleksandra and Hvidkjaer, Soeren, Liquid Co-Illiquidity Management (April 14, 2021). Available at SSRN: or

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
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Aleksandra Rzeźnik (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

Soeren Hvidkjaer

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000


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