Reversals and the Returns to Liquidity Provision
57 Pages Posted: 27 Jan 2023 Last revised: 23 May 2024
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Reversals and the Returns to Liquidity Provision
Number of pages: 57
Posted: 27 Jan 2023
Last Revised: 23 May 2024
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Reversals and the Returns to Liquidity Provision
NBER Working Paper No. w30917
Number of pages: 65
Posted: 06 Feb 2023
Last Revised: 24 Jun 2023
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Date Written: January 26, 2023
Abstract
Different aspects of liquidity impact the performance of short-run reversals in different ways, consistent with the predictions of microstructure models. Higher volatility is associated with faster, initially stronger reversals, while lower turnover is associated with more persistent, ultimately stronger reversals. These facts also hold outside the US and explain several seemingly disparate
results in the literature.
Keywords: Liquidity, reversals, momentum, volatility, turnover
JEL Classification: G10, G12
Suggested Citation: Suggested Citation
Dai, Wei and Medhat, Mamdouh and Novy-Marx, Robert and Rizova, Savina, Reversals and the Returns to Liquidity Provision (January 26, 2023). Available at SSRN: https://ssrn.com/abstract=4339591 or http://dx.doi.org/10.2139/ssrn.4339591
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