Contagious margin calls: How COVID-19 threatened global stock market liquidity

Sean Foley, Amy Kwan, Richard Philip and Bernt Ødegaard

Journal of Financial Markets, 2022, vol. 59, issue PA

Abstract: The outbreak of the COVID-19 pandemic caused some of the largest – and fastest – market dislocations in modern history. During the outbreak, liquidity quickly evaporated in a coordinated fashion across global markets. We show that a sudden increase in margin requirements during the pandemic is correlated with the withdrawal of global liquidity providers. These effects are concentrated in securities most exposed to high-frequency market makers, consistent with the binding nature of increased capital constraints.

Keywords: COVID-19; Margin requirements; Stock market liquidity, liquidity spiral (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Working Paper: Contagious Margin Calls: How Covid-19 threatened global stock market liquidity (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:59:y:2022:i:pa:s1386418121000628

DOI: 10.1016/j.finmar.2021.100689

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