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Liquidity shocks and institutional investors

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  • Dang, Tung Lam
  • Moshirian, Fariborz
  • Zhang, Bohui

Abstract

This paper investigates the role of institutional investors in amplifying market liquidity shocks during the global financial crisis of 2008–2009. We find that stocks with high pre-crisis institutional ownership experienced significant institutional holding reductions and larger price reductions during the crisis period. More importantly, this effect is pronounced for stocks with greater liquidity exposure to market liquidity shocks. Further analysis reveals that the institutional investors’ contribution to the amplification of liquidity shocks clusters primarily on non-block and/or independent institutional investors, who were more likely to encounter liquidity constraints during the crisis.

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  • Dang, Tung Lam & Moshirian, Fariborz & Zhang, Bohui, 2019. "Liquidity shocks and institutional investors," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 184-209.
    • Handle: RePEc:eee:ecofin:v:47:y:2019:i:c:p:184-209
    DOI: 10.1016/j.najef.2018.12.005
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    5. Dimcea Andrei, 2023. "The Impact of Social Norms on Stock Liquidity," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 68(1), pages 78-99, April.

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    More about this item

    Keywords

    Institutional investor; Liquidity shocks; Financial crisis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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