EconPapers    
Economics at your fingertips  
 

How do volatility regimes affect the pricing of quality and liquidity in the stock market?

Tarik Bazgour, Cédric Heuchenne, Georges Hübner and Danielle Sougné
Additional contact information
Cédric Heuchenne: Université catholique de Louvain, LIDAM/ISBA, Belgium

No 2021038, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: This paper shows how stock market volatility regimes affect the cross-section of stock returns along quality and liquidity dimensions. We find that, during crisis periods, low quality and low liquidity stocks experience relatively higher losses than predicted in normal times, while high quality and high liquidity stocks experience rather relatively lower losses. These findings lend strong support to the presence of cross-market and within-market flight-to-quality and to-liquidity episodes during crisis periods. During low volatility periods, however, low quality and low liquidity stocks earn relatively larger returns, while high quality and high liquidity stocks yield lower returns; suggesting that low volatility conditions benefit junk and illiquid stocks but not quality and liquid stocks. Finally, our results reveal that liquidity level dominates liquidity beta in explaining stock returns across the different market volatility regimes.

Keywords: Financial crises; liquidity; liquidity risk; quality; volatility regimes (search for similar items in EconPapers)
JEL-codes: G12 G32 (search for similar items in EconPapers)
Pages: 30
Date: 2021-01-01
Note: In: Studies in Nonlinear Dynamics & Econometrics, 2021, vol. 25(1), p. 20180127
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: How do volatility regimes affect the pricing of quality and liquidity in the stock market? (2021) Downloads
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:aiz:louvar:2021038

DOI: 10.1515/snde-2018-0127

Access Statistics for this paper

More papers in LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA) Voie du Roman Pays 20, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Nadja Peiffer ().

 
Page updated 2022-10-18
Handle: RePEc:aiz:louvar:2021038