Liquidity Constraints and the Demand for Assets: An Application to the Festivity Effect

35 Pages Posted: 2 Nov 2005

See all articles by Karim M. Abadir

Karim M. Abadir

Imperial College Business School

Laura Spierdijk

University of Groningen

Date Written: October 17, 2005

Abstract

The liquidity patterns of investors provide a new common framework to explain the autocorrelation of returns and volumes, as well as some calendar anomalies. Festivities are occasions around which liquidity constraints are particularly relevant, leading to a "festivity effect". This effect refers to a pre-festivity period of negative returns and relatively low trading activity and, once the occasion is over, a post-festivity period of positive returns and increased activity. We establish this effect for ten countries in the Middle- and Far-East where the main festivities occur every year at a different time of the Western calendar.

Keywords: Liquidity constraints, autocorrelation of returns and volumes,festivity effect, January effect, anomalies

JEL Classification: G14, G15

Suggested Citation

Abadir, Karim M. and Spierdijk, Laura, Liquidity Constraints and the Demand for Assets: An Application to the Festivity Effect (October 17, 2005). Available at SSRN: https://ssrn.com/abstract=829484 or http://dx.doi.org/10.2139/ssrn.829484

Karim M. Abadir (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://www3.imperial.ac.uk/portal/page?_pageid=61,629646&_dad=portallive&_schema=PORTALLIVE

Laura Spierdijk

University of Groningen ( email )

PO Box 800
Groningen, 9700 AV
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
227
Abstract Views
1,203
rank
135,783
PlumX Metrics