Liquid Co-Illiquidity Management

51 Pages Posted: 23 Feb 2022

See all articles by Soeren Hvidkjaer

Soeren Hvidkjaer

Copenhagen Business School

Massimo Massa

INSEAD - Finance

Aleksandra Rzeznik

York University

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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, informed trading

Suggested Citation

Hvidkjaer, Soeren and Massa, Massimo and Rzeznik, Aleksandra, Liquid Co-Illiquidity Management. Available at SSRN: or

Soeren Hvidkjaer

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000


Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Aleksandra Rzeznik (Contact Author)

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3

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