Liquid Co-Illiquidity Management
59 Pages Posted: 14 Oct 2022
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Liquid Co-Illiquidity Management
Number of pages: 51
Posted: 19 Apr 2021
Last Revised: 09 Dec 2021
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Liquid Co-Illiquidity Management
Number of pages: 59
Posted: 14 Oct 2022
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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: 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
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