Liquidity flows, drawdowns and trading networks in order driven markets: An application to Borsa Istanbul

Çaðrý Levent Uslu and Burak Evren

Borsa Istanbul Review, 2018, vol. 18, issue 3, 176-190

Abstract: We empirically analyze the agent based relationship between liquidity flow and downside price formation based on the individual trading network topologies of 20 equities in Borsa Istanbul between 2009/01–2013/12. We apply PageRank Algorithm to extract daily centrality degree in liquidity demand of domestic financial institutions classified as informed traders and use intraday maximum drawdown to capture intraday liquidity shocks. We find evidence that 1) Maximum cumulative loss for a given day, deepens with the increasing liquidity demand of informed traders. 2) The uncertainty in the centrality degree of informed trading is overtime positively related with the uncertainty regarding the intraday maximum drawdown. 3) Time Patterns are significant: Drawdown depth is highest on Thursdays and lowest on Mondays. Highest (lowest) drawdowns on May (March) indicate the existence of Sell-in-May effect and earnings announcement effect, respectively.

Keywords: PageRank; Drawdown; Centrality; Liquidity; Information; Downside risk (search for similar items in EconPapers)
JEL-codes: C13 C33 D82 D85 G1 G32 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bor:bistre:v:18:y:2018:i:3:p:176-190

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