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Local Business Cycles and Local Liquidity

Author

Listed:
  • Bernile, Gennaro
  • Korniotis, George
  • Kumar, Alok
  • Wang, Qin

Abstract

This study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.

Suggested Citation

  • Bernile, Gennaro & Korniotis, George & Kumar, Alok & Wang, Qin, 2015. "Local Business Cycles and Local Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(5), pages 987-1010, October.
    • Handle: RePEc:cup:jfinqa:v:50:y:2015:i:05:p:987-1010_00
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    Citations

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    Cited by:

    1. Smajlbegovic, Esad, 2019. "Regional Economic Activity and Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(3), pages 1051-1082, June.
    2. Zifeng Feng, 2022. "How Does Local Economy Affect Commercial Property Performance?," The Journal of Real Estate Finance and Economics, Springer, vol. 65(3), pages 361-383, October.
    3. Ma, Rui & Anderson, Hamish D. & Marshall, Ben R., 2019. "Risk perceptions and international stock market liquidity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 62(C), pages 94-116.
    4. Chongyu Wang & Jeffrey P. Cohen & John L. Glascock, 2019. "Geographic Proximity and Competition for Scarce Capital: Evidence from U.S. REITs," International Real Estate Review, Global Social Science Institute, vol. 22(4), pages 535-570.
    5. Cave, Joshua & Lancheros, Sandra, 2024. "Local peer influence on dividend payout decisions," Journal of Banking & Finance, Elsevier, vol. 164(C).
    6. Song, Jeongseop & Zhang, Fan, 2024. "Regional market uncertainty and corporate investment," The North American Journal of Economics and Finance, Elsevier, vol. 69(PB).
    7. Apergis, Nicholas & Dastidar, Sayantan Ghosh, 2024. "Local stock liquidity and local factors: Fresh evidence from US firms across states," Research in International Business and Finance, Elsevier, vol. 67(PA).
    8. Rehse, Dominik & Riordan, Ryan & Rottke, Nico & Zietz, Joachim, 2019. "The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy," Journal of Financial Economics, Elsevier, vol. 134(2), pages 318-332.
    9. Odegaard, Bernt Arne, 2017. "Is Household Diversification Increasing in Wealth? Norwegian Evidence," UiS Working Papers in Economics and Finance 2017/7, University of Stavanger.
    10. Ma, Rui & Marshall, Ben R. & Nguyen, Hung T. & Nguyen, Nhut H. & Visaltanachoti, Nuttawat, 2022. "Climate events and return comovement," Journal of Financial Markets, Elsevier, vol. 61(C).
    11. Wang, Wenlong & Huang, Yuqin & Watson, John & Yang, Bowen, 2023. "The intra-regional spillover effects of bond defaults: Evidence from the Chinese corporate debt market," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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