How do volatility regimes affect the pricing of quality and liquidity in the stock market?
Bazgour Tarik (),
Georges Hübner and
Additional contact information
Bazgour Tarik: Léonard de Vinci Pôle Universitaire, Research Center, Paris La Défense, France
Sougné Danielle: University of Liège, HEC Liège Management School, Liège, Belgium
Studies in Nonlinear Dynamics & Econometrics, 2021, vol. 25, issue 1, 17
This paper shows how stock market volatility regimes affect the cross-section of stock returns along quality and liquidity dimensions. We find that, during crisis periods, low quality and low liquidity stocks experience relatively higher losses than predicted in normal times, while high quality and high liquidity stocks experience rather relatively lower losses. These findings lend strong support to the presence of cross-market and within-market flight-to-quality and to-liquidity episodes during crisis periods. During low volatility periods, however, low quality and low liquidity stocks earn relatively larger returns, while high quality and high liquidity stocks yield lower returns; suggesting that low volatility conditions benefit junk and illiquid stocks but not quality and liquid stocks. Finally, our results reveal that liquidity level dominates liquidity beta in explaining stock returns across the different market volatility regimes.
Keywords: financial crises; liquidity; liquidity risk; quality; volatility regimes (search for similar items in EconPapers)
JEL-codes: G12 G32 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
For access to full text, subscription to the journal or payment for the individual article is required.
Working Paper: How do volatility regimes affect the pricing of quality and liquidity in the stock market? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:sndecm:v:25:y:2021:i:1:p:17:n:3
Ordering information: This journal article can be ordered from
Access Statistics for this article
Studies in Nonlinear Dynamics & Econometrics is currently edited by Bruce Mizrach
More articles in Studies in Nonlinear Dynamics & Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().