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Stock price synchronicity and market liquidity: The role of funding liquidity

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  • Ryu, Doojin
  • Webb, Robert I.
  • Yu, Jinyoung

Abstract

We examine the role of funding liquidity in shaping the relationship between stock price synchronicity and equity market liquidity in the context of an emerging market. Equity market liquidity and stock price synchronicity exhibit a U-shaped slope, contradicting the relative synchronicity hypothesis. Improvements in funding liquidity contribute to this pattern by providing liquidity for low-synchronicity stocks, which is more pronounced for thinly traded stocks.

Suggested Citation

  • Ryu, Doojin & Webb, Robert I. & Yu, Jinyoung, 2024. "Stock price synchronicity and market liquidity: The role of funding liquidity," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000813
    DOI: 10.1016/j.frl.2024.105051
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    More about this item

    Keywords

    Emerging equity market; Funding liquidity; Market liquidity; Stock price synchronicity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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