Intraday pattern in liquidity covariation: evidence from NYSE listed firms

Mohsen M. Saad and Ali F. Darrat

Applied Financial Economics, 2007, vol. 17, issue 11, 913-919

Abstract: Microstructure literature suggests common factors in liquidity measures. However, research on the intraday behaviour of liquidity commonality is scant. Because of higher information and inventory holding costs during the first and last half-hours of trading, we argue that liquidity covariations should increase during these half-hour trading periods. Our results from NYSE intraday data support a U-shaped pattern for liquidity covariation. These results have important implications for regulators, investors and academics.

Date: 2007
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DOI: 10.1080/09603100600675532

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