FACTOR CROWDING AND LIQUIDITY EXHAUSTION

Joseph M. Marks and Chenguang Shang

Journal of Financial Research, 2019, vol. 42, issue 1, 147-180

Abstract: Well‐known anomalies and stable patterns in equity returns are widely employed to guide stock selection. The use of overlapping multifactor models built on these patterns induces correlated trade across investors. A stock with a strong signal from a parsimonious multifactor stock selection model exhibits changes in trade activity, net order imbalances, lower volatility, lower liquidity level, and changes in liquidity comovement consistent with correlated trade. These results illustrate that correlated trading among investors can affect the liquidity and risk of the securities they trade, and imply that measures of portfolio liquidity risk that ignore these changes can understate risk.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/jfir.12165

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:42:y:2019:i:1:p:147-180

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-2592

Access Statistics for this article

Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay

More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().