Risk perceptions and international stock market liquidity

Rui Ma, Hamish D. Anderson and Ben R. Marshall

Journal of International Financial Markets, Institutions and Money, 2019, vol. 62, issue C, 94-116

Abstract: We use regression analysis to quantify the impact of investors’ risk perceptions, as measured by VIX, on stock market liquidity in 57 countries. We show that increased risk perception reduces liquidity around the world, and its impact is not subsumed by other well-documented market-level determinants of liquidity. The effect is pervasive, but is stronger in countries with higher GDP per capita, more trade openness, stronger governance, a more individualistic culture, and no short-selling constraints. It is not driven by periods of extreme changes in risk perception, expansionary or recessionary phases of the business cycle, or the way liquidity is measured.

Keywords: Liquidity; International stock markets; Risk perception; VIX (search for similar items in EconPapers)
JEL-codes: G15 G18 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:62:y:2019:i:c:p:94-116

DOI: 10.1016/j.intfin.2019.06.001

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