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Flight to Liquidity on the Tokyo Stock Exchange during the 2008 Share Market Crashes

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  • Brooke Alexandra Maeda

    (Department of Economics, School of Economics, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka 560-0043, Japan.)

Abstract

This paper explores the existence of the flight-to-liquidity phenomenon for shares which are traded on the Tokyo Stock Exchange (TSE) during share market crashes. Using data from the First section of the TSE, the existence of a flight-to-liquidity during the 2008 share market crashes is clearly documented. The TSE differs from other major exchanges as price limit rules restrict the daily price movements of shares. It provides a unique setting to test if a flight-to-liquidity occurs even when price limit rules may reduce market liquidity and delay price discovery. This study shows that despite having different trading rules, a flight-to-liquidity occurred during times of market uncertainty as investors were less willing to hold illiquid assets and rushed to sell these assets. The results are robust for smaller crash days and for different proxies of illiquidity.

Suggested Citation

  • Brooke Alexandra Maeda, 2015. "Flight to Liquidity on the Tokyo Stock Exchange during the 2008 Share Market Crashes," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 790-801.
    • Handle: RePEc:eco:journ1:2015-03-20
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Crash; Flight-to-Liquidity; Share Returns;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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