Liquidity Dynamics Across Small and Large Firms

34 Pages Posted: 3 Jul 2004

See all articles by Tarun Chordia

Tarun Chordia

Emory University - Department of Finance

Lakshmanan Shivakumar

London Business School

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Abstract

In this paper, we analyse cross-sectional heterogeneity in the time-series variation of liquidity in equity markets. Our analysis uses a broad time-series and cross-section of liquidity data. We find that average daily changes in liquidity exhibit significant heterogeneity in the cross-section; the liquidity of small firms varies more on a daily basis than that of large firms. A steady increase in aggregate market liquidity over the past decade is more strongly manifest in large firms than in small firms. Absolute stock returns are an important determinant of liquidity. We investigate cross-sectional differences in the resilience of a firm's liquidity to information shocks. We use the sensitivity of stock liquidity to absolute stock returns as an inverse measure of this resilience, and find that the measure exhibits considerable cross-sectional variation. Firm size, return volatility, institutional holdings, and volume are all significant cross-sectional determinants of this measure.

JEL Classification: D82, G10, G14

Suggested Citation

Chordia, Tarun and Shivakumar, Lakshmanan and Subrahmanyam, Avanidhar, Liquidity Dynamics Across Small and Large Firms. Economic Notes, Vol. 33, No. 1, pp. 111-143, February 2004. Available at SSRN: https://ssrn.com/abstract=551806

Tarun Chordia (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

Lakshmanan Shivakumar

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom
+44 20 7000 8115 (Phone)
+44 20 7000 8101 (Fax)

HOME PAGE: http://faculty.london.edu/lshivakumar/

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
26
Abstract Views
1,981
PlumX Metrics