Commonality in liquidity: An empirical examination of emerging order-driven equity and derivatives market



Syamala, Sudhakar R, Reddy, V Nagi and Goyal, Abhinav ORCID: 0000-0002-9859-2117
(2014) Commonality in liquidity: An empirical examination of emerging order-driven equity and derivatives market. Journal of International Financial Markets, Institutions & Money, 33. 317 - 334.

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Abstract

Using a sample of actively traded stocks and options from emerging order-driven market, this study examines and provides satisfactory evidence for the existence of commonality in liquidity for both spot and derivatives market. For equities, the market- and industry-wide commonality remain strong even after controlling for market returns and individual firm volatility and for options after accounting for the underlying stock market liquidity and implied volatility. Compared to the stock market, options market exhibit an increased commonality in liquidity with market capitalization. Here, information asymmetry acts as an important microstructure related source of commonality in liquidity across markets. The findings are robust across call and put options with negligible evidence of cross-sectional error correlation for all the liquidity measures.

Item Type: Article
Uncontrolled Keywords: Microstructure, commonality, liquidity, emerging order-driven market
Depositing User: Symplectic Admin
Date Deposited: 11 Nov 2014 09:30
Last Modified: 20 Oct 2021 20:22
DOI: 10.1016/j.intfin.2014.09.001
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/2001519