An Empirical Investigation of Global Liquidity Movement: Common Variation and Cross-Border Transmission

Project: Research

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Recent evidence suggests that individual stock liquidities tend to move together over time. This pattern of common variation in liquidity has important implications for determining the expected returns of individual stocks and for strategically allocating assets across different markets, industries, and instruments.This project will investigate the common variation in liquidity for the three most important equity markets in the world: the US, the UK, and Japan. The sample stocks will cover the S&P 500, the FTSE 100 and FTSE 250, and the Nikkei 300 indices. The researchers will not only analyze the liquidity co-movement within each country, but also examine whether there is a global liquidity factor and whether aggregate liquidity measures are related in these three countries. They will assess the relative importance of the country versus industry effect in liquidity co-variation. Finally, they will assemble intraday liquidity measures at 15-minute intervals. They will ascertain whether there is any cross-border liquidity transmission between US and UK markets when trading overlaps between 14:30 and 16:30 London time.


Project number7002153
Grant typeSRG
Effective start/end date1/04/0721/09/09