Volatility regimes and liquidity co-movements in cap-based portfolios
Renaud Beaupain,
Pierre Giot and
Mikael Petitjean
Finance, 2010, vol. 31, issue 1, 55-79
Abstract:
In contrast with prior studies focused on market-wide liquidity co-movements, we study class-wide liquidity co-movements and condition the analysis on volatility regimes using the Markov switching methodology. By defining three regimes of volatility (low, normal and high), we can investigate whether, and to what extent, liquidity co-movements in cap-based portfolios are affected by volatility fluctuations. As our analysis points out, class-wide shocks dominate stock-specific shocks in low volatility regimes for both large and mid caps. For small caps, cross-sectional statistical evidence of liquidity co-movements is weak in both high and low volatility regimes. Evidence indicates that failure to recognise the importance of volatility to determine class-wide variations in liquidity could significantly alter the performance and risk of size-based portfolios.
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=FINA_311_0055 (application/pdf)
http://www.cairn.info/revue-finance-2010-1-page-55.htm (text/html)
free
Related works:
Working Paper: Volatility regimes and liquidity co-movements in cap-based portfolios (2010)
Working Paper: Volatility regimes and liquidity co-movements in cap-based portfolios (2010)
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:cai:finpug:fina_311_0055
Access Statistics for this article
More articles in Finance from Presses universitaires de Grenoble
Bibliographic data for series maintained by Jean-Baptiste de Vathaire ().