Commonality in returns, order flows, and liquidity in the Greek stock market

Peter Dunne, Michael Moore and Vassilios Papavassiliou

The European Journal of Finance, 2011, vol. 17, issue 7, 577-587

Abstract: Using a unique high-frequency data-set on a comprehensive sample of Greek blue-chip stocks, spanning from September 2003 through March 2006, this note assesses the extent and role of commonality in returns, order flows (OFs), and liquidity. It also formally models aggregate equity returns in terms of aggregate equity OF, in an effort to clarify OF's importance in explaining returns for the Athens Exchange market. Almost a quarter of the daily returns in the FTSE/ATHEX20 index is explained by aggregate own OF. In a second step, using principal components and canonical correlation analyses, we document substantial common movements in returns, OFs, and liquidity, both on a market-wide basis and on an individual security basis. These results emphasize that asset pricing and liquidity cannot be analyzed in isolation from each other.

Keywords: market microstructure; common factors; order flow; liquidity (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/1351847X.2010.505725

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