Commonality in Liquidity: An Empirical Analysis of International Equity Markets

Description

Commonality in liquidity refers to the co-movement in liquidity measures such as bid-ask spread, quoted depth and order flow. This study focuses on 3,940 stocks in the S&P/Citigroup Broad Market Index (BMI) for 24 equity markets in developed countries other than the US. These are representative and highly-liquid stocks in each country and are of interest to global institutional investors. This study aims to answer three questions:whether there are any global or country-specific liquidity factors, as in contrast with earlier studies, the plan for this research is to rely on tick-by-tick data to accurately measure a number of liquidity variables for each stock, each industry, each country, each region (Europe and Asia Pacific for example), and within a global framework;whether and to what extent the liquidity factors in these 24 developed economies are related to liquidity factors in the US; andwhat the sources are behind the co-movement in global equity market liquidity.