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Does screen trading weather the weather? A note on cloudy skies, liquidity, and computerized stock markets

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  • Goodfellow, Christiane
  • Schiereck, Dirk
  • Verrier, Tatjana

Abstract

This paper tests for the presence of a weather effect on liquidity in a screen-based electronic stock market. The Exchange Liquidity Measure XLM enables us to separate the effect of cloudy skies on liquidity provided by market makers from this effect on liquidity naturally in the market. The empirical evidence suggests that cloudy skies correspond with high natural liquidity levels and low liquidity injected by market makers. This result is consistent with findings for floor-based stock trading and with the hypothesis that market makers add less value in markets with high natural liquidity.

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  • Goodfellow, Christiane & Schiereck, Dirk & Verrier, Tatjana, 2010. "Does screen trading weather the weather? A note on cloudy skies, liquidity, and computerized stock markets," International Review of Financial Analysis, Elsevier, vol. 19(2), pages 77-80, March.
    • Handle: RePEc:eee:finana:v:19:y:2010:i:2:p:77-80
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    References listed on IDEAS

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    Cited by:

    1. Liu, Huajin & Zhang, Wei & Zhang, Xiaotao & Liu, Jia, 2021. "Temperature and trading behaviours," International Review of Financial Analysis, Elsevier, vol. 78(C).
    2. Silva, Pedro & Almeida, Liliana, 2011. "Weather and stock markets: empirical evidence from Portugal," MPRA Paper 54119, University Library of Munich, Germany.

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