Reversals and the Returns to Liquidity Provision

Wei Dai, Mamdouh Medhat, Robert Novy-Marx and Savina Rizova

No 30917, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Different aspects of liquidity impact the performance of short-run reversals in different ways, consistent with the predictions of microstructure models. Higher volatility is associated with faster, initially stronger reversals, while lower turnover is associated with more persistent, ultimately stronger reversals. These facts also hold outside the US and explain several seemingly disparate results in the literature.

JEL-codes: G10 G12 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-mst
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Published as Wei Dai & Mamdouh Medhat & Robert Novy-Marx & Savina Rizova, 2024. "Reversals and the Returns to Liquidity Provision," Financial Analysts Journal, vol 80(2), pages 122-151.

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