Commonality in equity options liquidity: evidence from European Markets

Thanos Verousis (), Owain ap Gwilym and Nikolaos Voukelatos

The European Journal of Finance, 2016, vol. 22, issue 12, 1204-1223

Abstract: This paper examines commonality in liquidity for individual equity options trading in European markets. We use high-frequency data to construct a novel index of liquidity commonality. The approach is able to explain a substantial proportion of the liquidity variation across individual options. The explanatory power of the common liquidity factor is more pronounced during periods of higher market-wide implied volatility. The common factor's impact on individual options' liquidity depends on options' idiosyncratic characteristics. There is some evidence of systematic liquidity spillover effects across these European exchanges.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:22:y:2016:i:12:p:1204-1223

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DOI: 10.1080/1351847X.2016.1188836

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