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Commonalities in Liquidity: Evidence and Intraday Patterns in the Brazilian Market

Author

Listed:
  • Fernanda Gomes Victor

    (Universidade Federal do Rio Grande do Sul - UFRGS)

  • Marcelo Scherer Perlin

    (Universidade Federal do Rio Grande do Sul)

  • Mauro Mastella

    (Univesidade Estadual do Rio Grande do Sul)

Abstract

The objective of this work is to study the intraday dynamics of liquidity in the Brazilian stock exchange from the perspective of co-movements (or commonalities). In the study we argue that this common factor in the liquidity of the stocks is affected by the intraday patterns related to microstructure effects in the market. Using a high frequency database, such a hypothesis is investigated for the Brazilian data and we report large evidence that the commonality effect in the liquidity changes significantly along different times of the day. During the first and last hours of trading this effect is more intense. We justify this result as an effect of the arrival of new information to the market and the existence of the overnight risk.

Suggested Citation

  • Fernanda Gomes Victor & Marcelo Scherer Perlin & Mauro Mastella, 2013. "Commonalities in Liquidity: Evidence and Intraday Patterns in the Brazilian Market," Brazilian Review of Finance, Brazilian Society of Finance, vol. 11(3), pages 375-398.
    • Handle: RePEc:brf:journl:v:11:y:2013:i:3:p:375-398
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    Citations

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    Cited by:

    1. Ramos, Henrique Pinto & Perlin, Marcelo Scherer, 2020. "Does algorithmic trading harm liquidity? Evidence from Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).

    More about this item

    Keywords

    Market Microstructure; Liquidity Components; Commonality in Liquidity; Stock Market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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