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Business seasonality and stock liquidity

Author

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  • Marks, Joseph M.
  • Shang, Chenguang

Abstract

We investigate the relation between firms' business seasonality and their stock market liquidity and find robust evidence that firms with seasonal business tend to have less liquid equity. The effect of seasonality on stock liquidity is amplified for firms facing greater information asymmetry. Furthermore, firms with seasonal business patterns are associated with a higher probability of informed trading, and their stock returns co-move less with the market. Overall, our results suggest that the business patterns of such firms may negatively affect their information environments, and investors’ concerns with regard to adverse selection impede the liquidity provision for these firms.

Suggested Citation

  • Marks, Joseph M. & Shang, Chenguang, 2024. "Business seasonality and stock liquidity," Journal of Financial Markets, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:finmar:v:67:y:2024:i:c:s1386418123000678
    DOI: 10.1016/j.finmar.2023.100869
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    More about this item

    Keywords

    Seasonality; Information asymmetry; Stock liquidity;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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