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Commonality in Liquidity: A Global Perspective

Abstract : We conduct a comprehensive study of commonality in liquidity using intraday spread and depth data from 47 stock exchanges. We find that firm-level changes in liquidity are significantly influenced by exchange-level changes across most of the world's stock exchanges. Emerging Asian exchanges have exceptionally strong commonality, while those of Latin America exhibit little if any commonality. After documenting the pervasive role of commonality within individual exchanges, we examine commonality across exchanges. We find evidence of a distinct, global component in bid-ask spreads and depths. Local (exchange-level) sources of commonality represent roughly 39% of the firm's total commonality in liquidity, while global sources contribute an additional 19%. We also investigate potential sources of exchange-level and global commonality. We show that commonality is driven by both domestic and U.S. macroeconomic announcements.
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https://hal-hec.archives-ouvertes.fr/hal-00461036
Contributor : Antoine Haldemann <>
Submitted on : Wednesday, March 3, 2010 - 11:05:29 AM
Last modification on : Thursday, January 11, 2018 - 6:19:31 AM

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Paul Brockman, Dennis Y. Chung, Christophe Pérignon. Commonality in Liquidity: A Global Perspective. Journal of Financial and Quantitative Analysis, Cambridge University Press (CUP), 2009, Vol.44,n°4, pp.851-882. ⟨10.1017/S0022109009990123⟩. ⟨hal-00461036⟩

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