Who moved my liquidity? Liquidity evaporation in emerging markets in periods of financial uncertainty

Daimer J. Múnera and Diego A. Agudelo

Journal of International Money and Finance, 2022, vol. 129, issue C

Abstract: We investigate the role of different types of investors, foreigners, institutions, and individuals on the loss of liquidity in seven emerging markets during periods of global financial uncertainty from 2008 to 2016. We find that net sales from foreigners are the main driver of liquidity loss. Using TAQ data from one market, we find that active sales of foreigners erode liquidity, whereas some individuals act as the liquidity providers of last resort. We find no consistent role for institutions. These results highlight the importance of retail investors as liquidity providers in markets without designated market makers.

Keywords: Financial uncertainty; Foreign investors; Individual investors; Liquidity; Net buys; Order imbalances (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:129:y:2022:i:c:s0261560622001267

DOI: 10.1016/j.jimonfin.2022.102723

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