Liquidity commonality in extreme quantiles: Indian evidence

Abhinava Tripathi, Alok Dixit and Vipul,

Finance Research Letters, 2021, vol. 38, issue C

Abstract: The study examines liquidity commonality in the context of the National Stock Exchange of India, using the market model of Chordia, Roll, & Subrahmanyam (2000). The tail behavior of liquidity commonality is studied using the fixed-effect panel quantile regression model. The results suggest that commonality is time-varying and heterogeneous across conditional quantiles of liquidity. The evidence shows that the low barriers to entry and exit in order-driven markets create a de-facto liquidity balancing mechanism across the extreme quantiles of liquidity. Overall, the study supports the ‘free-entry’ and ‘free-exit’ hypothesis.

Keywords: Liquidity commonality; Principal component analysis; Limit-order book; De-facto market making (search for similar items in EconPapers)
JEL-codes: C33 G12 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319305331

DOI: 10.1016/j.frl.2020.101448

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