Essays on liquidity shocks and price dynamics
(2025)
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PhD_Thesis_Floris_Laly_Final_Version_DIAL.pdf
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Details
- Authors
- Supervisors
- Petitjean, Mikael
- Abstract
- Liquidity shocks strongly influence real-time price formation by disrupting market equilibrium and amplifying volatility, particularly in illiquid environments or during periods of stress. This PhD dissertation examines several dimensions of these shocks through different market phenomena. Chapter II analyzes mini flash crashes (MFCs), identifying significant differences across trading venues and showing that downward crashes are significantly shorter and more severe than upward crashes, with implications for regulation. Chapter III introduces a new method for identifying flash events, called the 'Sequence-Based Flash Event' (SFE) methodology, which allows for a more precise detection of flash events. Using this approach, the study shows that high-frequency traders (HFTs) do not trigger flash events but intensify them as they unfold, underscoring the importance of rigorous methodological choices in regulatory assessments. Chapter IV tests classic trading anomalies, focusing on high-frequency momentum and contrarian effects in U.S. blue-chip stocks, and shows that after accounting for realistic transaction costs, none of the strategies outperforms the benchmark strategy. As for Chapter V, it compares static and dynamic beta-estimation models in the European and U.S. REIT markets, finding that dynamic approaches, particularly the SSM and ACB models, deliver superior performance. The dissertation concludes by emphasizing the importance of better understanding high-frequency liquidity shocks, taking into account their impact on the stability and integrity of financial markets.
- Affiliations
UCLouvain SSH/LIDAM/LFIN - Louvain Finance
Citations
Laly, F. (2025). Essays on liquidity shocks and price dynamics.