Analysis of the dynamic relationship between liquidity proxies and returns on the French CAC 40 index

Ayad Assoil (), Ndéné Ka () and Jules Sadefo-Kamdem ()
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Ayad Assoil: MRE-Montpellier Recherche en Economie, UM-Université de Montpellier
Ndéné Ka: Université Alioune Diop de Bambey
Jules Sadefo-Kamdem: MRE-Montpellier Recherche en Economie, UM-Université de Montpellier
Authors registered in the RePEc Author Service: Jules SADEFO KAMDEM

SN Business & Economics, 2021, vol. 1, issue 10, 1-23

Abstract: Abstract The aim of this paper is to analyze the dynamic evolution of six liquidity proxies on time and to find their causality with the French CAC 40 stock market index returns, over the period from January 2007 to December 2018. To this end, we use a vector autoregressive approach and the impulse response function and we perform the Granger causality test between the CAC 40 index returns and six different liquidity proxies. Empirical results suggest a significant short-term relationship between the returns and the liquidity. As for causality test, the results reveal that there is unidirectional causality running from returns to liquidity.

Keywords: Liquidity risk; Market risk; VAR model; Granger causality; Impulse response function; CAC 40 market (search for similar items in EconPapers)
JEL-codes: C22 C58 G10 G15 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s43546-021-00129-7

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