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The determinants and pricing of liquidity commonality around the world

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  • Moshirian, Fariborz
  • Qian, Xiaolin
  • Wee, Claudia Koon Ghee
  • Zhang, Bohui

Abstract

In this paper, we examine the determinants and pricing of liquidity commonality using intraday data from 39 markets over 15 years. We show that liquidity commonality is driven by both market-level and firm-level factors. Liquidity commonality is higher in weaker and more-volatile economic and financial environments, in areas with poor investor protection, and in opaque information environments. Liquidity commonality is also affected by cultural and behavioral factors, including individualism and uncertainty avoidance. Moreover, we find that liquidity commonality is priced in the world's stock markets and that the pricing effect is stronger in developed markets.

Suggested Citation

  • Moshirian, Fariborz & Qian, Xiaolin & Wee, Claudia Koon Ghee & Zhang, Bohui, 2017. "The determinants and pricing of liquidity commonality around the world," Journal of Financial Markets, Elsevier, vol. 33(C), pages 22-41.
    • Handle: RePEc:eee:finmar:v:33:y:2017:i:c:p:22-41
    DOI: 10.1016/j.finmar.2017.02.004
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    More about this item

    Keywords

    Liquidity commonality; Pricing of liquidity; International financial markets;
    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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