Systematic liquidity in the long run

Charly Sujoto; Petko Kalev; Robert Faff

doi:10.1080/17446540701591357

Systematic liquidity in the long run

Charly Sujoto, Petko Kalev, Robert Faff

Research output: Contribution to journal › Article › peer-review

Abstract

In this article we develop a long-run systematic liquidity measure by augmenting the standard model with a lagged dependent variable. Our empirical application involves a large sample of Australian equities and we find pervasive evidence of long-run commonality in liquidity. We also find evidence of a mean reversion tendency for time-varying liquidity beta. This result implies that the liquidity movement in the stock market maybe more influenced by noise traders' activity rather than informed traders' activity.

Original language	English
Pages (from-to)	187-191
Number of pages	5
Journal	Applied Financial Economics Letters
Volume	4
Issue number	3
DOIs	https://doi.org/10.1080/17446540701591357
Publication status	Published - 2008

Keywords

Australia
liquidity (economics)
stocks

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10.1080/17446540701591357

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abstract = "In this article we develop a long-run systematic liquidity measure by augmenting the standard model with a lagged dependent variable. Our empirical application involves a large sample of Australian equities and we find pervasive evidence of long-run commonality in liquidity. We also find evidence of a mean reversion tendency for time-varying liquidity beta. This result implies that the liquidity movement in the stock market maybe more influenced by noise traders' activity rather than informed traders' activity.",

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AB - In this article we develop a long-run systematic liquidity measure by augmenting the standard model with a lagged dependent variable. Our empirical application involves a large sample of Australian equities and we find pervasive evidence of long-run commonality in liquidity. We also find evidence of a mean reversion tendency for time-varying liquidity beta. This result implies that the liquidity movement in the stock market maybe more influenced by noise traders' activity rather than informed traders' activity.

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KW - stocks

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Systematic liquidity in the long run

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