Liquid Co-Illiquidity Management

59 Pages Posted: 14 Oct 2022

See all articles by Aleksandra Rzeznik

Aleksandra Rzeznik

York University

Soeren Hvidkjaer

Copenhagen Business School

Massimo Massa

INSEAD - Finance

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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

Suggested Citation

Rzeznik, Aleksandra and Hvidkjaer, Soeren and Massa, Massimo, Liquid Co-Illiquidity Management. Available at SSRN: https://ssrn.com/abstract=4247372 or http://dx.doi.org/10.2139/ssrn.4247372

Aleksandra Rzeznik (Contact Author)

York University ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Soeren Hvidkjaer

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

HOME PAGE: http://www.hvidkjaer.net

Massimo Massa

INSEAD - Finance ( email )

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

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