Market-wide liquidity co-movements, volatility regimes and market cap sizes

Beaupain, Renaud;Giot, Pierre;Petitjean, Mikael
(2006)

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Liquidity co-movements are studied within three different market capitalization indices, each made up of 100 NYSE stocks. Long-run liquidity co-movements are quantified in each class and compared to short-run liquidity co-movements. To condition the analysis of systematic liquidity upon index volatility, three regimes of volatility are defined using the Markov-switching methodology. Our results show that the magnitude of liquidity co-movements is on average positively related to the market capitalization of the index. There are significant differences between short-run and long-run liquidity comovements, and between spread-based measures and depth-based measures. Finally, the volatility regime bears on the liquidity co-movements relationships.
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Beaupain, R., Giot, P., & Petitjean, M. (2006). Market-wide liquidity co-movements, volatility regimes and market cap sizes (CORE Discussion Papers 2006/102). https://hdl.handle.net/2078.5/54061