EconPapers    
Economics at your fingertips  
 

Through stormy seas: how fragile is liquidity across asset classes and time?

Nihad Aliyev, Matteo Aquilina, Khaladdin Rzayev and Sonya Zhu

No 1229, BIS Working Papers from Bank for International Settlements

Abstract: Market liquidity across asset classes has considerably increased in recent decades. Our study of stocks, foreign exchange (FX), and government bonds in the US, Europe, and Japan - using 25 years of high-frequency data - reveals a significant decline in both the average and standard deviation of bid-ask spreads across all asset classes. However, we also observe an increase in its skewness and kurtosis in equity and bond markets, indicating more frequent episodes of illiquidity. In contrast, FX markets do not show a significant increase in the higher moments of the distribution of bid-ask spreads. We identify structural breaks in the time series of spread distributions across regions and asset classes, associate these breaks with macroeconomic shocks and changing market conditions, and quantify the cost of this fragility to investors.

Keywords: liquidity; market resiliency; high frequency trading; fragmentation (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2024-11
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/work1229.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work1229.htm (text/html)

Related works:
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:bis:biswps:1229

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().

 
Page updated 2025-03-30
Handle: RePEc:bis:biswps:1229