The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy

Dominik Rehse, Ryan Riordan, Nico Rottke and Joachim Zietz

No 18-024, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We test the effects of uncertainty on market liquidity using Hurricane Sandy as a natural experiment. Given the unprecedented strength, scale and nature of the storm, the potential damages of a landfall near the Greater New York area were unpredictable and therefore uncertain. Using a difference-in-differences setting, we compare the market reactions of Real Estate Investment Trusts (REITs) with and without properties in the widely-published evacuation zone of New York City prior to landfall. We nd relatively less trading and wider bid-ask spreads in affected REITs. The results confirm theory on the detrimental effects of uncertainty on market functioning.

Keywords: Uncertainty; liquidity; financial crisis; natural experiment (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mst and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:18024

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