Market Liquidity and Funding Liquidity: An Empirical Investigation

Giorgio Valente ()

No 152010, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We provide empirical evidence that the relationship between market and funding liquidity display significant nonlinearities, consistent with theories of market trading with financially-constrained agents. Using data for the US equity market, we uncover nonlinearities that are consistent with a model with two extreme regimes: a lower regime characterized by the absence of correlation between market liquidity and funding liquidity, and an upper regime where the two variables are statistically positively correlated. Over the sample period the two variables are uncorrelated most of the time, since shocks to funding liquidity are economically small. This situation persists until agents are forced towards their capital constraints and shocks to funding liquidity becomes economically important.

Pages: 24 pages
Date: 2010-06
New Economics Papers: this item is included in nep-ban and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.hkimr.org/uploads/publication/95/ub_ful ... o-15_2010-final-.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hkimr.org/uploads/publication/95/ub_full_0_2_248_wp-no-15_2010-final-.pdf [301 Moved Permanently]--> http://www.aof.org.hk/research/HKIMR/uploads/publication/95/ub_full_0_2_248_wp-no-15_2010-final-.pdf [301 Moved Permanently]--> https://www.aof.org.hk/research/HKIMR/uploads/publication/95/ub_full_0_2_248_wp-no-15_2010-final-.pdf)

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:hkm:wpaper:152010

Access Statistics for this paper

More papers in Working Papers from Hong Kong Institute for Monetary Research Contact information at EDIRC.
Bibliographic data for series maintained by HKIMR ().