Dissertations / Theses on the topic 'Liquidity'
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Bawazir, Hana Saeed. "Liquidity, liquidity risk and liquidity regulation in banking." Thesis, University of Southampton, 2018. https://eprints.soton.ac.uk/421043/.
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This thesis focuses on the importance of bank liquidity in the overall banking system during various liquidity shocks. To this end, three different empirical research are conducted in this thesis. We start with an investigation of the impact of bank market power on liquidity creation during the global financial crisis (GFC) in European banking. Second, we extend our analysis and examine how the liquidity ratio requirements under Basel III affects their risk and return. Following this, we consider the banking system in the Gulf Cooperation Council (GCC) and investigate whether the effect of the oil price shock that began in June 2014 on bank lending differs depending upon the level of bank liquidity. Using different causal effect econometric analysis, we present robust evidence for the following findings. First, we find that banks with greater market power significantly increase liquidity creation in the economy. Second, we present strong evidence for a positive link between bank liquidity and their ability to mitigate a negative shock. Focusing on the GFC, we find that the combined effect of high market power and government intervention through guarantees reduces liquidity creation as the level of bank liquidity increases to ensure financial stability. In addition, we find that adherence to the liquidity requirements under Basel III causes financial stability of European banks to increase. Also, we find evidence of a trade-off between liquidity and bank profitability. The subsequent analysis of bank lending in the GCC countries during the oil price shock suggests that credit growth generally declines as a result of lower oil prices. However, banks with a high level of liquidity buffers mitigate the impact of the oil price shock. This offers greater support for the view that higher liquidity buffers are a source of reducing potential bank distress and promote financial stability during crises years.
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Nowak, Arkadiusz. "Liquidity levels, liquidity risk, and market fragmentation." Access to citation, abstract and download form provided by ProQuest Information and Learning Company; downloadable PDF file, 89 p, 2008. http://proquest.umi.com/pqdweb?did=1601516561&sid=2&Fmt=2&clientId=8331&RQT=309&VName=PQD.
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Von, Trotta-Treyden Michael, and Rickard Strand. "Momentum & Liquidity : Do Liquidity Strategies Add Return?" Thesis, Stockholm University, School of Business, 2005. http://urn.kb.se/resolve?urn=urn:nbn:se:su:diva-6043.
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Momentum can be explained as a passive strategy which is rebalanced continually over time. It can be divided into a long position in observed “winners”, and a short position in observed “losers”. This study tries to find out if some kind of liquidity strategy can increase any abnormal return generated by a conventional momentum strategy. Our data is based on monthly returns from all listed companies at Stockholm Stock Exchange between January 1997 and June 2005. We have, in addition to a plain momentum strategy, composed four different liquidity strategies, based on four different observing periods and four different holding periods. Our findings show that momentum has been present during our observation period, where the most profitable portfolio has an observation period of 3 months and a holding period of 6 months, and generates an abnormal return of 253 percent. Or findings from adding liquidity as a second component show that the most profitable strategy is to reverse the high-low strategy with observe and hold periods of 12 months, which has generated an abnormal return of 345% and a risk-adjusted alpha of 0.411. We can also conclude that additional abnormal and risk-adjusted return has been generated by adding liquidity as a second component to plain momentum. Overall the prevailing strategy regarding liquidity is to go long in low volume loser or short in high volume losers. We also find that the most extreme values are generated in the 12 month holding period portfolios. Reasonable explanations for these findings might be derived from a potential steeper upside in low liquidity losers, company specific characteristics and behavioural theories, but can not be concluded beyond reasonable doubt out of the results in this paper.
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Salé, Laurent. "Liquidity in the banking sector." Thesis, Paris 1, 2016. http://www.theses.fr/2016PA01E002/document.
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Comme un déterminant de la survie d'une banque durant la crise financière de 2007/2008, la liquidité dans le secteur bancaire a depuis récemment représenté un défi pour les communautés financières et universitaires. Les trois articles présentés dans cette thèse portent sur les deux principales facettes de la liquidité dans le secteur bancaire: la détention d'actifs liquides (à savoir, la trésorerie et les ressources assimilées) et le processus de création de la liquidité dans les banques utilisé pour financer des prêts. Comme on le verra dans les articles, ces deux aspects de la liquidité peuvent être considérés comme les deux faces d'une même pièce. Je reconnais que la liquidité dans le secteur bancaire est liée à la création monétaire; cependant, cette thèse se concentre sur les deux précités aspects de la liquidité. Tout d'abord, cette introduction présente comment le concept de la liquidité a évolué dans la pensée économique dominante. La seconde partie considère le renouveau de la détention de cash qui a été observée depuis la crise financière de 2007/2008 dans le secteur bancaire. La troisième section examine les propriétés de liquidité. La quatrième section explore ce que nous ne savons pas sur la liquidité. La cinquième section identifie et sélectionne trois problèmes fondamentaux relatifs à liquidité et qui sont analysés dans les trois articles présentés dans thèse. La sixième et dernière section présente la méthodologie utilisée dans les trois articles pour répondre à ces questions. Chapitre 1 : “Why do banks hold cash ?". La détention de cash et assimilé cash par les banques détiennent est devenue un enjeu majeur depuis la crise financière de 2008 qui a démontré que la trésorerie retenue est un déterminant majeur dans les chances de survie des banques. Cet article examine les déterminants de la détention de cash banque en utilisant des données internationales pour la période 1981-2014. Sur la base d'un grand échantillon, nous documentons une augmentation séculaire de la détention de cash par les banques pendant une période de 35 ans. Nous apportons la preuve que la nature optimale dynamique de la détention de cash est rejetée dans le secteur bancaire. Ces résultats contrastent avec le secteur non bancaire, où la nature optimale dynamique de trésorerie est observée. Chapitre 2: “Does an increase in capital negatively impact banking liquidity creation?”. A partir d'un ensemble de données composé d'un panel de 940 banques cotées des pays européens, américains et asiatiques, cet article documente l'évolution de la création de la liquidité bancaire au cours d'une période de 35 ans (1981-2014). La preuve empirique confirme que les niveaux de risque et de capital jouent un rôle significatif et négatif dans la création de liquidité par les banques. Dans l'ensemble, les effets négatifs de l’augmentation de capital sur la création de la liquidité bancaire sont plus importants que les effets positifs sur la gestion du risque correspondant, ce qui suggère que les exigences de fonds propres imposées pour soutenir la stabilité financière affectent négativement la création de liquidités. Ces résultats ont de larges implications pour les régulateurs bancaires. Chapitre 3: “Positive effects of Basel III on banking liquidity creation”. Ce document évalue l'effet du cadre réglementaire de Bâle III sur la création de liquidité bancaire. Les résultats sont basés sur un ensemble de données de panel de banques américaines qui représentent environ 60% des prêts et dépôts américains sur une période de 7 ans (2009-2015), en plus de différence dans la différence et les méthodes de survie standard. Tous les composants de Bâle III pris ensemble, il existe des preuves empiriques que Bâle III a un effet positif sur la création de liquidité bancaire sur le marché américain, en particulier pour les grandes banques. Ces résultats ont de larges implications pour les régulateurs bancairesAs one determinant of a bank’s survival during the financial crisis of 2007-2008, liquidity in the banking sector presents a challenge for the financial and academic communities and has recently become a central point of interest. The three articles presented in this thesis focus on the two main facets of liquidity in the banking sector: the holding of liquid assets (i.e., cash and assimilated resources) and the process of liquidity-creation in banks used to fund loans. As will be discussed in the articles, these two aspects of liquidity can be viewed as two sides of the same coin. I acknowledge that liquidity in banking is linked to the creation of money; however, this thesis focuses on the aforementioned two aspects of liquidity. First, this section presents how ideas about liquidity in the banking sector have evolved in mainstream economic thought. Second, it considers the revival of cash-holding that has been observed since the financial crisis of 2007-2008. Third, it discusses the properties of liquidity. Fourth, it explores what we do not know about liquidity. Fifth, it identifies the fundamental issues analyzed in the three articles. Finally, it presents the methodology used in the articles to address these issues. Chapter1: “Why do banks hold cash ?”. This paper investigates the determinants of bank cash holding by using international data for the period 1981-2014. The results do not seem to provide support for the substitutability hypothesis regarding the substitutive relation between cash and debt levels. Further, using the GMM-system estimation method, we find no support for the dynamic optimal cash model, suggesting that cash management in the banking sector is bounded by number of constraints that make it difficult for the agents to optimize their utility. Chapter 2: “Does an increase in capital negatively impact banking liquidity creation?”. From a dataset composed of a panel of 940 listed banks based in European, American and Asian countries, this paper documents the evolution of bank liquidity creation over a 35-year period (1981-2014). The empirical evidence confirms that risk and equity levels play a significant and negative role. Overall, the negative effects of equity increases on bank liquidity creation are more significant than corresponding positive effects on risk management, suggesting that capital requirements imposed to support financial stability negatively affect liquidity creation. These findings have broad implications for policymakers. Chapter 3: “Positive effects of Basel III on banking liquidity creation”. This paper estimates the effect of the Basel III regulatory framework on banking liquidity creation. The results are based on a panel data set of U.S. banks that represent approximately 60% of U.S. loans and deposits over a 7-year period (from 2009 to 2015) in addition to difference-in-difference and standard survival methods. All components of Basel III taken together, there is empirical evidence that Basel III has a positive effect on banking liquidity creation in the US market in particular for major banks. These findings have broad implications for policy makers
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Tian, Shu. "Essays on Stock Market Liquidity and Liquidity Risk Premium." ScholarWorks@UNO, 2010. http://scholarworks.uno.edu/td/1153.
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This dissertation addresses issues concerning liquidity and its volatility. It consists of two essays. The first essay, "Liquidity, Macro Factors and the U.S. Equity Flows to Emerging Markets", examines the role of liquidity on equity flows from the U.S. to fifteen emerging markets around the world. Since liquidity has many dimensions, an emphasis is placed on utilizing various measures of liquidity. Moreover, both static and dynamic analyses, as well as short and long-horizon regressions, are performed to investigate the research questions. The results suggest that a liquid market attracts flows, after controlling for market size, political openness, exchange rate and other macro factors. Additionally, evidence indicates that the importance of liquidity varies across regions. For instance in the Asian region, the relation between equity flows and volume-related liquidity is weak while that between flows and price impacts of trading is strong. Evidence also supports the relevance of macro factors such as a country's economic freedom. The second essay, "Liquidity Risk Premium Puzzle and Possible Explanations", attempts to resolve the liquidity risk puzzle: a negative relation between returns and liquidity risk, documented by Chordia, Subrahmanyam, and Anshuman (2001b), by employing alternative liquidity measures and by incorporating factors that might potentially affect the relation. The main findings are as follows. The relation between stock returns and volatility of liquidity depends on the measure of liquidity. When liquidity measures are based on trading volume, the results are largely mixed, but when liquidity is measured based on price impact of trading, the relation between returns and volatility of price impacts is positive, as expected. The results are sensitive to time periods examined. Moreover, during extreme down markets, the aversion to liquidity volatility is lower, suggesting behavioral bias might potentially address the puzzle. Empirical findings also suggest that liquidity risk premium tends to be greater for small stocks. Finally, when the VIX index is included as a proxy for investor sentiment, the results indicate that the relation between returns and liquidity risk is significantly positive in four out of five liquidity measures. In sum, the empirical analysis partially but not completely addresses the puzzle.
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Bhyat, Aneez. "An examination of liquidity risk and liquidity risk measures." Master's thesis, University of Cape Town, 2010. http://hdl.handle.net/11427/10113.
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Includes bibliographical references (leaves 199-205).Liquidity risk represents a vacuum of rigour in the otherwise well-researched area of risk management. In both practice and theory most of finance is silent regarding its scope and effect. This is principally due to a lack of consensus regarding its definition and measurement. Current liquidity risk measures differ fairly widely in both respects. This thesis attempts at addressing this by consolidating and examining the principle liquidity risk measures used in financial literature.
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Holovka, Martin. "New challenges in managing Liquidity risk - Liquidity Black Holes." Master's thesis, Vysoká škola ekonomická v Praze, 2010. http://www.nusl.cz/ntk/nusl-76182.
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Following the financial turmoil in 2007/2008 liquidity black holes (LBH) has become arising topic often discussed among academics as well as portfolio managers all around the world. More recent view on liquidity risk covers those liquidity black holes which occur when the liquidity completely dries up in a particular market and the market becomes one-sided. There are basically 2 channels through which liquidity can be affected - Demand and Supply. In first case, the portfolios of investors lose the value and consequently the investors lose confidence in financial system. In the second case, banks hit their capital constraints, they tighten the terms of providing credits and loans to reduce the credit risk exposure and hence it becomes more difficult for firms to raise the funds. At this point dangerous spiral arises and the liquidity of financial system evaporates rapidly. The crucial point of this master thesis is to find the main determinants of Liquidity Black holes and find possible solutions to avoid their appearance.
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Azzouzi, Idrissi Youssef. "La liquidité bancaire : risques, thésaurisation et dimension systémique." Thesis, Grenoble, 2014. http://www.theses.fr/2014GRENG010.
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Cette thèse s'inscrit dans le contexte d'après crises des subprimes et des dettes souveraines européennes. Il s'agit de périodes durant lesquelles les banques, en particulier dans la zone Euro et aux Etats-Unis, ont fait face à un assèchement de liquidité sans précédent ayant paralysé le système bancaire et conduit à la faillite de banques dont certaines solvables. La thèse cherche à répondre à la problématique suivante : Quelles sont les raisons du dysfonctionnement de deux canaux importants d'approvisionnement en liquidité par les banques, à savoir, le marché des actifs et surtout le marché monétaire interbancaire ? L'objectif est d'avoir un cadre d'analyse qui permet d'évaluer les propositions de la réglementation Bâle III en matière de contrôle du risque de liquidité dans les banques et d'éclairer les réflexions autour de la supervision bancaire. La première étude empirique est consacrée aux interactions entre le risque de liquidité de financement et le risque de liquidité de marché en situation de crise. Elle confirme bien la présence d'un renforcement mutuel entre ces deux types de risque dans les cas américain et européen durant la période allant de 2007 à 2011. La deuxième étude empirique se focalise sur le dysfonctionnement du marché monétaire interbancaire dans la zone Euro durant la même période en identifiant les motifs de la thésaurisation de liquidité par les banques, à savoir, le risque de contrepartie, le motif de précaution et le motif de spéculation. Les résultats montrent bien qu'il y a une relation significativement positive entre ces trois facteurs et la thésaurisation. Enfin, la troisième étude met l'accent sur les conséquences de la thésaurisation en termes de contagion interbancaire et de risque systémique. Les résultats confirment en effet l'impact de la thésaurisation sur le risque systémique dans la zone EuroDuring the U.S subprimes and the European sovereign debt crisis, banks faced with an unprecedent liquidity drying-up, leading to a banking system paralysis and failures of banks (including some solvable banks), in particular in United States and Euro zone. This dissertation seeks to answer the following question: what are the reasons of dysfunction of two important channels of liquidity supply of banks, namely, asset market and interbank money market? The aim is to have an analysis framework in order to evaluate banking regulations issued by Basel III and to enlighten reflections about banking supervision. The first empirical study examines the interactions between funding liquidity risk and market liquidity risk. Its results confirm that these two risk types are mutually reinforcing in American and European cases during the period between 2007 and 2011. The second empirical study focuses on the failure of the interbank market in Euro zone during the same period by identifying the motives behind the bank liquidity hoarding, namely, counterparty risk, precautionary motive and speculative motive. The results show that there is a significantly positive relation between these three factors and the liquidity hoarding. Finally, the third empirical study illustrates the repercussions of this phenomenon on systemic risk. The results confirm the impact of liquidity hoarding on systemic risk in Euro zone
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Killeen, William P. "Essays on liquidity." Thesis, Queen's University Belfast, 2002. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.269060.
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Junaid, Ahmad. "Liquidity spirals, commonality, corporate governance and crisis : a case of an emerging market." Thesis, Aix-Marseille, 2014. http://www.theses.fr/2014AIXM1038.
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Dans cette étude, nous essayons de combler le fossé entre deux courants de la littérature. Tout d'abord, nous menons une enquête approfondie sur les relations entre la liquidité et la baisse du marché dans un pays émergent (Brésil). Dans notre recherche, nous suivons la méthodologie utilisée par Hameed et al (2010) et Adrian et al (2011). Dans la première partie de l'étude, en utilisant la variable d'estimation de la mesure de liquidité proposée par Corwin et Schultz (2012), nous effectuons une analyse des séries temporelles pour estimer l'effet des rendements sur le marché des rentabilités individuelles, et l'impact de la crise sur la liquidité. Nous étendons en outre notre analyse à la liquidité des financements, mesurée par l'écart de la rémunération entre les "commercial papers" et le taux de base de la banque centrale, pour estimer l'effet de la baisse du marché lorsque les spéculateurs sont confrontés à une contrainte de financement. Dans la deuxième partie de notre recherche nous nous intéressons aux facteurs de la liquidité. Nous estimons l'effet de la liquidité du marché sur liquidité idiosyncrasique, et examinons si cet effet est amplifié dans le contexte de baisse importante des marchés. Dans la troisième partie de la thèse, nous répartissons les actions en trois portefeuilles equi-pondérés en fonction des pratiques de gouvernance d'entreprise différentielles. Nous effectuons l'analyse mentionnée ci-dessus pour estimer si la liquidité des entreprises ayant des pratiques de gouvernance d'entreprise différentes réagit différemment en présence de baisse importante des marchés et de spirales de liquiditéIn this study we try to bridge the gap between two strands of literature, first we conduct a thorough investigation about relation between, Market liquidity, funding liquidity and market declines in an emerging market i.e. Brazil. Then we conduct the analysis in the context of differential corporate governance practices and try to find if higher corporate governance practices have an effect on liquidity and how it affects stock liquidity in market declines. We closely follow the methodology used by Hameed et al (2010) and Adrian et al (2011). In the first part of the paper, using the High-Low spread estimator proposed by Corwin et Schultz (2012) as our liquidity proxy, we conduct a time series analysis to estimate the effect of individual returns market returns, and large market declines on liquidity. We further extend our analysis to include funding liquidity, measured by the spread between the commercial paper and the central bank rate, to estimate the effect of market declines when speculators face a funding constraint. In the second part of our analysis we move towards liquidity commonality. We estimate the effect of market wide liquidity movements on individual stock liquidity, and whether this effect is amplified in the context of large market downturns. In the third part of the paper we sort the stocks into three equally weighted portfolios based on differential corporate governance practices. We conduct the above mentioned liquidity analysis to estimate if liquidity of firms with differential corporate governance practices react differently in the times of large market downturns and liquidity spirals
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SILVA, RAFAEL RIBEIRO MADEIRA DA. "THE IMPACT OF BASEL III LIQUIDITY REQUIREMENTS ON BANK LIQUIDITY MANAGEMENT." PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO, 2018. http://www.maxwell.vrac.puc-rio.br/Busca_etds.php?strSecao=resultado&nrSeq=33568@1.
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Este trabalho analisa o impacto dos requerimentos de liquidez da Basiléia III na gestão de liquidez dos bancos. A partir de uma base de dados que engloba bancos de todos os países signatários do Comitê de Basiléia III, foram definidos indicadores de liquidez bancária com base nas práticas utilizadas na literatura econômica e que busquem servir de proxies aos indicadores propostos pelo Comitê. Foram então verificados os cronogramas de implementação dos novos requerimentos de liquidez estabelecido por cada país. Acompanhou-se, então, a evolução dos indicadores de liquidez antes e depois do novo requerimento de liquidez instituído pelo Comitê. Foi observado alta estatisticamente relevante nas proxies de liquidez de curto prazo. Por outro lado, o resultado das regressões que buscam acompanhar a evolução de liquidez de longo prazo demonstraram quedas estatisticamente significativas.This paper analyzes the impact of Basel III liquidity requirements on banks liquidity management. Indicators of bank liquidity were defined based on the practices used in the economic literature and that seek to serve as proxies to the indicators proposed by the Committee. Database was built including banks from all countries that are signatories to the Basel III Committee. The timelines for implementation of the new liquidity requirements established by each country were then verified. The evolution of the liquidity indicators before and after the new liquidity requirement established by the Committee was followed. A statistically significant elevation was observed in short-term liquidity proxies. On the other hand, the result of the regressions that seek to follow the evolution of long-term liquidity showed statistically significant declines.
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Soula, Jean-Loup. "Essais sur la liquidité bancaire : contributions à la mesure du risque de liquidité et à la gestion de la production de liquidité bancaire." Thesis, Strasbourg, 2017. http://www.theses.fr/2017STRAB012/document.
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Le risque de liquidité des banques reflète leur fonction de création de liquidité. Ces institutions sont fragiles par nature, exposées à la menace de ruées des créanciers de court terme. La thèse contribue par plusieurs aspects à une meilleure compréhension du risque de liquidité. Le deuxième chapitre propose une mesure de la fragilité bancaire basée sur la valeur des actifs détenus. Les résultats confirment de manière originale le caractère fragile des banques. La fonction de production de liquidité bancaire est toutefois bénéfique pour l’économie. Le troisième chapitre propose une analyse de la capacité des banques à produire de la liquidité en lien avec leurs choix d’activité et leur business model. La production d’information dans le cadre d’un modèle relationnel et la capacité à bénéficier de synergies informationnelles entre segments d’activité apparaissent comme déterminant l’efficacité de la production de liquidité bancaire. Néanmoins, l’exposition excessive des banques au risque de liquidité est à l’origine des crises. Le quatrième chapitre évalue l’exposition des banques au risque de liquidité en fonction de l’évolution des conditions générales de liquidité. Les résultats soulignent l’impact différencié des chocs de liquidité sur le risque supporté par les banquesBank liquidity risk reflects the function of banks to create liquidity. Banks are fragile, exposed to the possibility of runs from short-term creditors. This dissertation contributes to a better understanding of bank liquidity risk. The second chapter proposes a measure of bank fragility based on the value of the assets held by a bank. Results confirm, in an original way, the fragile nature of banks. However, bank liquidity creation benefits to the economy. The third chapter analyses the capacity of banks to produce liquidity in conjunction with their choices in terms of activity and business model. Determinants of the efficiency to produce liquidity appear to be the bank capacity to produce information through a relationship-oriented business model and to benefit from informational synergies through the activity mix. Nevertheless, excessive exposition of banks to liquidity risk results in bank liquidity crises. The fourth chapter investigates bank exposition to liquidity risk depending on the evolution of aggregate liquidity conditions. Results underline the heterogenous effect of liquidity shocks on the risk borne by banks
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Eross, Andrea. "Analysing liquidity crashes and liquidity risk contagion in short-term interbank rates." Thesis, University of Southampton, 2015. https://eprints.soton.ac.uk/381501/.
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The financial crisis of 2007-08 is recognised to be the worst crisis since the Great Depression of the 1930s. As a result, liquidity risk and contagion perceived in the interbank market has gained increased attention. In this thesis, the LIBOR-OIS spread, the German-US bond spread, the Euro- dollar currency swap and the EONIA rate are studied to reveal causalities, interdependencies and regime changes in the short-term interbank market. Interbank markets are channels of contagion due to the overlapping claims banks have on one another. If liquidity dries up in the overnight market, as happened during the latest financial crisis, the domino effect transmits liquidity shocks to other markets. Through three distinct investigations, the main objective of this thesis is to investigate liquidity crashes and contagion in the short-term interbank market. The first analysis demonstrates that there is causality among the series and that they are also cointegrated, while structural breaks are detected in the identified long-run equilibrium relationships. To better identify the breaks, in the second analysis, a novel univariate two-state regime switching model is presented. The variability in the LIBOR-OIS spread along with thresholds of different levels reveal regime changes consistent with liquidity crashes. Thus, the model acts as an early-warning indicator of an imminent liquidity shortage striking the interbank market. Depending which state the system is in, the series is modelled either as a first-order autoregressive process, or as a Gaussian white noise process. Finally, a multivariate endogenous regime switching model describes how liquidity shocks drive the transition between crisis and non-crisis regimes. The investigation uncovers the self fulfilling nature of endogenous liquidity shocks and their propagation across markets before and during financial crises. Moreover, the results suggest that liquidity shocks originating from the LIBOR-OIS spread govern the dynamics of the system.
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Junaid, Ahmad. "Liquidity spirals, commonality, corporate governance and crisis : a case of an emerging market." Electronic Thesis or Diss., Aix-Marseille, 2014. http://www.theses.fr/2014AIXM1038.
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Dans cette étude, nous essayons de combler le fossé entre deux courants de la littérature. Tout d'abord, nous menons une enquête approfondie sur les relations entre la liquidité et la baisse du marché dans un pays émergent (Brésil). Dans notre recherche, nous suivons la méthodologie utilisée par Hameed et al (2010) et Adrian et al (2011). Dans la première partie de l'étude, en utilisant la variable d'estimation de la mesure de liquidité proposée par Corwin et Schultz (2012), nous effectuons une analyse des séries temporelles pour estimer l'effet des rendements sur le marché des rentabilités individuelles, et l'impact de la crise sur la liquidité. Nous étendons en outre notre analyse à la liquidité des financements, mesurée par l'écart de la rémunération entre les "commercial papers" et le taux de base de la banque centrale, pour estimer l'effet de la baisse du marché lorsque les spéculateurs sont confrontés à une contrainte de financement. Dans la deuxième partie de notre recherche nous nous intéressons aux facteurs de la liquidité. Nous estimons l'effet de la liquidité du marché sur liquidité idiosyncrasique, et examinons si cet effet est amplifié dans le contexte de baisse importante des marchés. Dans la troisième partie de la thèse, nous répartissons les actions en trois portefeuilles equi-pondérés en fonction des pratiques de gouvernance d'entreprise différentielles. Nous effectuons l'analyse mentionnée ci-dessus pour estimer si la liquidité des entreprises ayant des pratiques de gouvernance d'entreprise différentes réagit différemment en présence de baisse importante des marchés et de spirales de liquiditéIn this study we try to bridge the gap between two strands of literature, first we conduct a thorough investigation about relation between, Market liquidity, funding liquidity and market declines in an emerging market i.e. Brazil. Then we conduct the analysis in the context of differential corporate governance practices and try to find if higher corporate governance practices have an effect on liquidity and how it affects stock liquidity in market declines. We closely follow the methodology used by Hameed et al (2010) and Adrian et al (2011). In the first part of the paper, using the High-Low spread estimator proposed by Corwin et Schultz (2012) as our liquidity proxy, we conduct a time series analysis to estimate the effect of individual returns market returns, and large market declines on liquidity. We further extend our analysis to include funding liquidity, measured by the spread between the commercial paper and the central bank rate, to estimate the effect of market declines when speculators face a funding constraint. In the second part of our analysis we move towards liquidity commonality. We estimate the effect of market wide liquidity movements on individual stock liquidity, and whether this effect is amplified in the context of large market downturns. In the third part of the paper we sort the stocks into three equally weighted portfolios based on differential corporate governance practices. We conduct the above mentioned liquidity analysis to estimate if liquidity of firms with differential corporate governance practices react differently in the times of large market downturns and liquidity spirals
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Zhang, Qingjing. "Liquidity in stock markets." Thesis, Durham University, 2014. http://etheses.dur.ac.uk/10926/.
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This thesis uses liquidity to examine some stock market phenomena. It begins by researching the role of liquidity in explaining the “disappearing dividend puzzle” across several financial markets. Then, it examines the cash/stock dividend payouts and their determinants in China. Finally, this paper investigates the interplay among illiquidity, variance risk premium and stock market returns. The research studies the disappearing dividend puzzle with a large sample of firms representing eighteen countries over the sample period from 1989 to 2011. Our investigation finds that risk is an important determinant of firms’ dividend payout policy. For firms in the US, France, UK and other European markets, liquidity plays an additional role in explaining the changes in propensity to pay. Then we test the explanatory power of liquidity, risk and catering incentives in the “disappearing dividend puzzle”. The thesis finds support for catering theory among firms in common law countries but not those in civil law countries. The catering incentives persist even after adjusting the propensity to pay for liquidity. However, after controlling for risk, the significant explanatory power of catering incentives in the changes in propensity to pay disappears. Our results indicate that catering incentives capture the risk difference between dividend payers and non-dividend payers. Then, the research studies the payout patterns of both cash and stock dividend in China over the sample period 1999-2013. The Chinese stock market is a fast-growing market with some special characteristics, such as complicated corporate ownership structures. The specific characteristics of Chinese firms might affect the dividend payout policy in China. We first study the determinants of Chinese firms’ dividend payout policy. Our results indicate that lifecycle, risk and liquidity are important determinants of firms’ cash/stock dividend policy. We find that firms with larger board size and fewer annual board meetings are more likely to pay cash dividends and less likely to pay stock dividends. Also, the research notes that managerial stake is insignificant in explaining Chinese firms’ cash/stock dividend payouts. Then, we investigate the catering theory in China. Our findings show that catering incentives matter in explaining the unexpected percentage of dividend payers if we do not control for liquidity/risk. However, once we control for liquidity/risk, the catering incentives contribute little toward explaining the changes in propensity to pay cash/stock dividends. Our results imply that Chinese firms’ cash/stock dividend policy is influenced by the board, rather than managers or investors. Finally, this thesis investigates the interplay among illiquidity, variance risk premium and market returns. Previous studies that test whether liquidity is useful in forecasting market returns ignore the question of whether variance risk premium might also be useful for this purpose. As a result, these papers potentially overestimate the role of liquidity in predicting market returns. This thesis tests whether liquidity and variance risk premium are useful for return forecasting by comprehensively investigating the interplay among illiquidity, variance risk premium and market returns. We adopt monthly US data from January 1992 to December 2010. The results show that variance risk premium, reflecting investors’ risk aversion to volatility risk, causes variations in stock returns, and in turn causes market illiquidity, rather than vice versa. Furthermore, we find that variance risk premium has substantial forecasting power over future market returns, while liquidity measure does not. Additionally, our results indicate that variance risk premium impacts equity returns by acting on the risk factors, i.e. market risk premium, value factor and momentum factor.
16
Hanke, Bernd. "Asset prices and liquidity." Thesis, London Business School (University of London), 2004. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.408224.
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17
Żurawski, Piotr Marcin. "Essays on market liquidity." Thesis, London School of Economics and Political Science (University of London), 2011. http://etheses.lse.ac.uk/351/.
Full textAbstract:
In the first chapter of my Thesis I propose a model of front-running in noisy market environment. I demonstrate that even if the front-runner/predator has no initial knowledge about the position of a distressed trader he will be still able to front-run his orders in a linear Bayesian-Nash equilibrium. This is possible because initial orders of the distressed trader tend to reveal his initial position. The contribution of this chapter is also in the analysis of long-term dynamics of predatory trading under Gaussian uncertainty. Second chapter treats about the dark-pools of liquidity which are highly popular systems that allow participants to enter unpriced orders to buy or sell securities. These orders are crossed at a specified time at a price derived from another market. I present an equilibrium model of coexistence of dark-pools of liquidity and the dealer market. Dealer market provides the immediate execution, whereas the dark-pool of liquidity provides lower cost of trading. Risk-averse agents in equilibrium optimally choose between safe dealer market and cheaper dark-pool of liquidity. In the third chapter I solve for a partial-equilibrium optimal consumption and investment problem, when one of the investment assets is traded infrequently. Opportunity to trade the "illiquid asset" arises upon the occurrence of a Poisson event. Only when such event occurs a trader is able to change (increase or decrease) her position in the illiquid asset. The investor can consume continuously from the bank account. After deriving HJB equation, I analyze in details the implications of illiquidity on the optimal level of consumption, allocation and welfare. The optimal policy is solved using algorithm from aeronautics.
18
Haykir, Ozkan. "Essays on stock liquidity." Thesis, University of Exeter, 2017. http://hdl.handle.net/10871/29656.
Full textAbstract:
This thesis consists of three main empirical chapters on the effect of stock liquidity on exchange markets. The first (Chapter 2) investigates the pricing ability of an illiquidity measure, namely the Amihud measure (Amihud, 2002), in different sample periods. The second (Chapter 3) determines the causal link between two well-known market quality factors liquidity and idiosyncratic volatility adopting two-stage least squares methodology (2SLS). The last empirical chapter (Chapter 4) revisits the limits to arbitrage theory and studies the link between stock liquidity and momentum anomaly profit, employing the difference-in-differences approach. The overall contribution of this thesis is to employ causal techniques in the context of asset pricing in order to eliminate potential endogeneity problems while investigating the relation between stock liquidity and exchange markets. Chapter 2 investigates whether the Amihud measure is priced differently if the investor is optimistic or, conversely, pessimistic about the future of the stock markets. The results of the chapter show that Amihud measure is priced in the low-sentiment period and that there is illiquidity premium when investor sentiment is low. Chapter 3 studies whether a change in stock liquidity has an impact on idiosyncratic volatility, employing causal techniques. Prior studies investigate the link between liquidity and idiosyncratic volatility but none focus on the potential problem of reverse causality. To overcome this reverse causality problem, I use the exogenous event of decimalisation as an instrumental variable and employ two-stage least squares approach to identify the impact of liquidity on idiosyncratic volatility. The results of the chapter suggest that an increase in illiquidity causes an increase in idiosyncratic volatility. As an additional result, my study shows that reduction in the tick size as a result of decimalisation improves firm-level stock liquidity. Chapter 4 examines whether liquid stocks earn more momentum anomaly profits compare to illiquid stocks, using the implementation of different tick sizes for different price ranges in the American Stock Exchange (AMEX) between February 1995 and April 1997. This programme provides a plausibly exogenous variation to disentangle the endogeneity issue and allows me to examine the impact of liquidity on momentum, by clearly exploiting the difference-in-difference framework. The results of the chapter show that liquid stocks earn more momentum profit than illiquid stocks.
19
Arregui, Nicolás. "Liquidity facilities and signaling." Thesis, Massachusetts Institute of Technology, 2010. http://hdl.handle.net/1721.1/62396.
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Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010.Cataloged from PDF version of thesis.
Includes bibliographical references.
This dissertation studies the role of signaling concerns in discouraging access to liquidity facilities like the IMF contingent credit lines (CCL) and the Discount Window (DW). In Chapter 1, I analyze the introduction of IMF CCL in an economy with asymmetric information and financial frictions. Countries have private information about the probability of a being hit by a negative aggregate shock. IMF insurance provides outside liquidity that partially alleviates financial frictions. In the absence of IMF CCL, weak countries face inefficient project termination when the economy is hit by the negative shock, but receive cheaper credit ex ante as they are pooled with strong countries. Once contingent credit lines are introduced, weak countries have to choose between reducing inefficient liquidation and losing the ex ante cross subsidy from pooling. Introducing the CCL leads to a Pareto improvement relative to the no-IMF benchmark only if the IMF can offer a sufficiently large amount of outside liquidity or if it can allow for cross subsidization from strong to weak countries. Chapter 2 studies the role of eligibility requirements that make the CCL close to a rating agency. Risk-averse countries, with private information regarding the probability of being hit by an aggregate income shock, seek insurance in international capital markets. I focus on a No-IMF benchmark in which the target economies for the facility manage to separate from weaker countries by underinsuring. I model IMF CCL as the introduction of an imperfect stress test that countries may voluntarily take. If the stress test is good enough, the IMF generates a Pareto improvement by providing target economies with a cheaper way to separate from weaker economies. However, if the quality of the stress test is low enough, there exists an equilibrium in which no country chooses to take the exam. Provided that the cost of the exam is low enough, I show that forcing all countries to take the exam Pareto dominates the equilibrium in which no country takes the exam. In Chapter 3, I study the role of the DW in the presence of competing liquidity facilities with market determined interest rates. There is stigma attached to borrowing at the DW. Stigma costs are assumed to be fixed costs and therefore banks borrow at the DW only when the fed funds market is severely tight. A more attractive discount window (lower discount rate or lower signaling costs) results in higher total DW borrowing and a higher fraction of banks borrowing from the facility. It is also accessed in more states of the world. I propose an empirical approach based on cross-district data to test for the stigma hypothesis.
by Nicolás Arregui.
Ph.D.
20
Su, Youjin. "Liquidity and asset pricing." Thesis, University of Aberdeen, 2013. http://digitool.abdn.ac.uk:80/webclient/DeliveryManager?pid=211117.
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This thesis is an empirical analysis which is focussed on the potential relationship between liquidity and asset pricing; where its key objective is to provide an assessment about the role for liquidity in asset pricing models. The data sample covers the United Kingdom from 1987 to 2009 and the methodological approaches include; Fama and MacBeth (1973) cross section regressions; time series regression analysis; factor analysis; and, non-nested testing. Several liquidity measures are compared, including the Amivest, the Hui-Heubel and the Amihud measures of liquidity. The role of unexpected liquidity and monetary policy is also considered. Building on earlier findings in the thesis, a deeper examination of the role of liquidity in explicit asset pricing frameworks, such as the capital asset pricing model and the Fama-French three factor model, then takes place through incorporation of the Hui- Heubel and Amihud measures of liquidity. Overall, the results suggest that conditions of declining liquidity (rising illiquidity) appear to be associated with increasing risk premia. This observation appears also to apply when portfolios are sorted by size. Finally, the conclusion is reached that modelling liquidity within an asset pricing framework is likely to be very useful, particularly given the changes to the financial market horizon where liquidity as a concept has come increasingly to the fore because of current government policies associated with quantitative easing.
21
Marra, Miriam. "Credit markets and liquidity." Thesis, University of Warwick, 2012. http://wrap.warwick.ac.uk/55106/.
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In the light of the events of the recent financial crisis and of the increased importance of liquidity for the functionality of firms and financial markets, this thesis studies how a lack of liquidity (illiquidity) can affect the prices of credit derivatives and how illiquidity can propagate across credit and equity markets. The thesis incorporates three self-contained research papers. The first paper (Chapter 2) examines the effect of liquidity on the pricing of senior structured and unstructured credit indices (Senior Tranche of CDX.NA.IG Index and AAA Corporate Bond Index) over the period 2006-2009. The paper reveals that for both instruments the credit spreads align over time with the returns and the volatility of the equity market and with interest rates, as suggested by the structural model theory (Merton, 1974). However, it also shows that during the subprime crisis the highly-rated tranche of the CDX.NA.IG Index suffered from a substantial discount due to the lack of depth in the relevant markets, the scarcity of risk-capital, and the high liquidity preference exhibited by investors. By contrast, market liquidity and funding liquidity are found to be less significant in explaining the increase in the spread of the AAA Bond Index. The second paper (Chapter 3) investigates the existence of illiquidity commonality across equity and credit markets and the potential channels that can explain this phenomenon. Illiquidity appears to co-move across equities and credit default swaps in particular over crisis periods. For most firms, illiquidity is transmitted from one market (CDS) to the other (equity). Higher funding costs, market volatility and firms' systematic risk cause the equity-CDS illiquidity commonality to increase. However, the illiquidity commonality is also strongly related to the debt-to-equity hedge ratio which captures the arbitrage linkage between equity and CDSs. The paper shows that the illiquidity contagion across two fundamentally-linked assets can be generated by higher demand of liquidity for hedging and speculative trading. The third paper (Chapter 4) studies possible explanations for the credit spread puzzle. First, the paper shows that the credit spread puzzle can be partially explained by investors' aversion to a firm's extreme losses. The paper implements a novel calibration of the Merton (1974) model to a measure of sensitivity of CDS premia to equity volatility (which captures changes in the fat left tail of the firm's risk-neutral distribution). The predicted CDS premia are higher than those obtained using more traditional calibration methodologies, but still lower than those observed in the market. Therefore, the paper turns to studying the effects of investors' ambiguity aversion and CDS market illiquidity on CDS premia. The results show that when a market is illiquid and uncertainty is greater, sellers of credit default swaps charge more and CDS premia increase.
22
Hagströmer, Björn. "Liquidity and portfolio optimisation." Thesis, Aston University, 2009. http://publications.aston.ac.uk/15679/.
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This thesis presents research within empirical financial economics with focus on liquidity and portfolio optimisation in the stock market. The discussion on liquidity is focused on measurement issues, including TAQ data processing and measurement of systematic liquidity factors (FSO). Furthermore, a framework for treatment of the two topics in combination is provided. The liquidity part of the thesis gives a conceptual background to liquidity and discusses several different approaches to liquidity measurement. It contributes to liquidity measurement by providing detailed guidelines on the data processing needed for applying TAQ data to liquidity research. The main focus, however, is the derivation of systematic liquidity factors. The principal component approach to systematic liquidity measurement is refined by the introduction of moving and expanding estimation windows, allowing for time-varying liquidity co-variances between stocks. Under several liability specifications, this improves the ability to explain stock liquidity and returns, as compared to static window PCA and market average approximations of systematic liquidity. The highest ability to explain stock returns is obtained when using inventory cost as a liquidity measure and a moving window PCA as the systematic liquidity derivation technique. Systematic factors of this setting also have a strong ability in explaining a cross-sectional liquidity variation. Portfolio optimisation in the FSO framework is tested in two empirical studies. These contribute to the assessment of FSO by expanding the applicability to stock indexes and individual stocks, by considering a wide selection of utility function specifications, and by showing explicitly how the full-scale optimum can be identified using either grid search or the heuristic search algorithm of differential evolution. The studies show that relative to mean-variance portfolios, FSO performs well in these settings and that the computational expense can be mitigated dramatically by application of differential evolution.
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Huang, Yuping. "Liquidity in equity markets." Thesis, University of Glasgow, 2015. http://theses.gla.ac.uk/7036/.
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This thesis aims to explore stock liquidity, a crucial attribute of financial assets, in US market. In particular, this research attempts to address a number of issues in the theoretical study of liquidity, some of which even still matters for debate. The empirical results in Chapter 3 suggest that the significance of liquidity on asset returns is time specific, in other words, the heterogeneity between liquidity components exhibits a Business Cycle effect. In particular, the liquidity risk premium is strengthened during downturns of the market conditions, as the association between the asset liquidity and return in the cross-sectional dimension is relatively stronger in the period of lower market liquidity. Besides, the analysis is carried out that focuses on the interrelationship between the market-wide liquidity components and the market dynamics, and some interesting Granger causality relationship is detected. Specifically, price impact components are Granger caused by transaction costs and trading activity, but do not Granger cause trading activity. Moreover, the Granger causality detected in this section also explains that market past performance is caused by liquidity, especially the dimensions of trading activity and price impact, and subsequently, the market-wide trading activity affects the market portfolio most recent and further performance. These findings for liquidity measures in this comparative analysis establish a significant step towards the understanding of liquidity measures in a more systematic and consistent setting, and can be a good starting point for constructing more robust liquidity measures. Based on a negative relationship between volatility of liquidity and asset returns, Chapter 4 extends this finding and provides a comparative analysis of the volatility of liquidity risk through an asset pricing framework considering several dimensions of liquidity, such as transaction cost, trading activity and price impact. The empirical findings, consistent with the literature, provide evidence of heterogeneity across various liquidity components and volatility specifications. In addition, by extracting the commonality of volatility of liquidity across individual assets via principal component analysis, the systematic components of volatility of liquidity are examined accordingly. Finally, a mimicking portfolio is constructed and used to track the systematic risk of volatility of liquidity, providing evidences that the latter is priced in asset returns. Chapter 5 studies the impact of market-wide liquidity volatility on momentum profit. It is examined by investigating whether the volatility of market liquidity dominates the market liquidity level in terms of affecting and predicting the momentum profit. Besides, it is determined that the impact is state-dependent; in particular, the impact of the fluctuation of the market liquidity on the momentum payoff is stronger when the market volatility or the illiquidity is higher. Finally, by a closer inspection of the momentum crash event in 2009, it is observed that the volatility of market liquidity increases sharply a couple of months before the crash, while stays stable during and after the crash. This thesis provides implications for investment perspective in terms of the trading strategies based on liquidity as well as momentum. For instance, the performance of the liquidity measurement is time-varying associated with market conditions. Moreover, the fluctuation of market liquidity, i.e., the volatility of liquidity, should also be considered for pricing issues. The empirical results suggest that the asset, of which the liquidity fluctuates heavily, usually has lower returns; this indication applies to six popular liquidity measures according to the empirical results. More importantly, investors could make profits by reversing the momentum trading strategy in momentum crash periods.
24
Goyenko, Ruslan. "Liquidity and asset pricing." [Bloomington, Ind.] : Indiana University, 2006. http://gateway.proquest.com/openurl?url_ver=Z39.88-2004&rft_val_fmt=info:ofi/fmt:kev:mtx:dissertation&res_dat=xri:pqdiss&rft_dat=xri:pqdiss:3243782.
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Thesis (Ph.D.)--Indiana University, Kelley School of Business, 2006.Title from PDF t.p. (viewed Nov. 17, 2008). Source: Dissertation Abstracts International, Volume: 67-12, Section: A, page: 4608. Adviser: Charles Trzcinka.
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Stahel, Christof W. "International stock market liquidity." Connect to this title online, 2004. http://rave.ohiolink.edu/etdc/view?acc%5Fnum=osu1091726658.
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Thesis (Ph. D.)--Ohio State University, 2004.Title from first page of PDF file. Document formatted into pages; contains xi, 110 p.; also includes graphics. Includes bibliographical references (p. 70-76).
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Balkanli, Aysegul. "Liquidity Risk Situation Of Turkish Insurance Industry And Firm Specific Factors Affecting Liquidity." Master's thesis, METU, 2010. http://etd.lib.metu.edu.tr/upload/2/12611774/index.pdf.
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Recent changes in the insurance regulations and laws in Turkey lead insurance industry to gain further importance and turn the insurance industry one of the rising sectors in financial markets. However, while these favorable events for the insurance industry takes place in Turkish markets, on the global markets the economic crisis initiated with the collapse of US sub-prime mortgage markets deepened and the credit crunch arose in the aftermath. In the times of credit stress having good liquidity base is important for the firms. In recent economic crisis, liquidity related troubles resulted in bailouts or takeovers of giant financial companies. In order to prevent negative consequences of inadequate liquidity and to sustain financial stability, having appropriate level of liquidity is especially crucial for financial companies like insurers. In this thesis it is aimed to analyze the Turkish insurance sector&rsquos liquidity condition for the period between 2002 and 2008 with the help of liquidity ratios. Considering the nature of the business, a distinction is made between &ldquo
non-life&rdquo
and &ldquo
life&rdquo
insurance companies while assessing their liquidity ratios. Furthermore, panel data regression analysis is conducted to determine the firm specific factors affecting the liquidity decisions of non-life insurers operating in Turkey.
27
Umlauft, Roland. "Essays on liquidity and risk." Doctoral thesis, Universitat Pompeu Fabra, 2013. http://hdl.handle.net/10803/119822.
Full textAbstract:
In Chapter 1 I investigate the economic importance of correlation in mutual fund flows for funds with overlapping portfolio positions. I illustrate theoretically that commonality in trading by funds due to flow correlation influences the optimal portfolio. Furthermore, I show that the expected return from an asset for a specific agent is conditional on correlation of this particular asset holder’s flows with his peers. Finally, I derive a theoretical upper bound of optimal flow correlation and hypothesize the existence of at least one optimal equilibrium outcome for any combination of pairwise fund flow correlations. Empirically, I introduce a measure of portfolio adjusted flow correlation and find that co-movement in flows can significantly deteriorate fund performance in the long-run, by about 1.4% annually between peer funds with high and low correlation, adjusted for style. Finally, I find that around one third of US mutual funds holds non-optimal portfolios as far as dynamic liquidity from correlated trading patterns is concerned.
The research in Chapter 2 presents evidence for the existence of differences in asset beta risk in the liquidity cross-section of stocks. I argue that because of differences in liquidity (or trading cost), most trading activity is concentrated on the subset of liquid assets. In the presence of systematic wealth shocks this leads to an increase in beta risk for the liquid asset class beyond their true level of risk from the underlying dividend process with regard to the market risk factor. Vice-versa, the risk of illiquid assets becomes understated. Moreover, it is argued that a reduction of trading cost in the cross-section will reduce such differences and lead to a convergence of risk factor estimates towards the true value of underlying risk. Empirical evidence using data surrounding the tick-reduction event at the New York Stock Exchange is supporting this hypothesis. I find that beta estimates for liquid assets exceed their illiquid peers, while the difference in beta between the groups is significantly reduced after the exogenous trading cost reduction due to the tick-change event.
In Chapter 3 I investigate asset liquidity surrounding fire-sale events by mutual funds. I develop revised method for identifying liquidity-driven sales. I find empirical evidence of both front running and liquidity provision surrounding liquidity-driven fire-sale events. Applying my identification method for sample selection I find significantly faster rates of return reversal compared to previous literature. Moreover, I show that asset liquidity measures return to their intrinsic values very shorty after a fire-sale. Finally, I show that a trading strategy of liquidity provision by outsiders provides economically significant returns.En el Capítulo 1 investigo la importancia económica de la correlación entre los flujos de fondos relativos a fondos de inversión con carteras similares. Demuestro de forma teórica que la similitud entre las estrategias de trading de distintos fondos de inversión causadas por la alta correlación entre sus flujos de fondos influye en las decisiones optimas sobre carteras de inversión. De forma adicional, demuestro que el retorno esperado de los activos esta condicionado a la correlación de las corrientes de fon- dos con sus competidores. Finalmente, derivo el limite superior teórico de correlación y presento la hipótesis de existencia de una cartera ́optima para cada posible matriz de covarianzas. Introduzco una medida de correlación de flujos de fondos, ajustada por la cartera de inversión. Empíricamente, encuentro una caída del rendimiento a largo plazo de un 1.4% anualmente entre fondos de inversión con estilo similar de inversión. Adema ́s, demuestro que un tercio de los fondos de inversión en los EEUU adoptan carteras de inversión sub-óptimas con respeto a la dinámica de la liquidez derivada de la cercanía en sus estrategias de inversión. En el Capítulo 2 presento evidencia empírica de que existen diferencias en el riesgo beta de los activos en la sección cruzada de la liquidez de las acciones. Las diferencias de liquidez o de costes de transacción hacen que los agentes centren su actividad de trading sobre la clase de los activos m ́as líquidos. Cuando existe el riesgo de shocks a la riqueza sistémicos, esto genera un incremento en el riesgo beta para la clase de los activos m ́as líquidos en exceso del valor real del riesgo que se deriva de sus dividendos con relación al factor de riesgo de mercado. Y vice-versa, el riesgo de los activos ilíquidos se subestima. Una reducción uniforme en costes de transacción puede reducir dicha diferencia entre las be- tas. Demuestro de forma empírica que esto es as ́ı, utilizando datos sobre precios de activos durante el per ́ıodo de cambio de la forma de contabilizar los precios que ocurrió en el New York Stock Exchange. Demuestro que la reducción de costes puede reducir la diferencia en la beta entre activos líquidos y ilíquidos. En el Capítulo 3 estudio cambios en la liquidez de los activos durante ventas masivas por parte de fondos de inversión. Introduzco una innovación en la metodología de identificación de ventas por razones de liquidez frente a ventas por razones de valoración. Encuentro evidencia empírica de pre-venta de activos y provisión de liquidez durante de las ventas masivas por razones de liquidez. Utilizando mi método de identificación de ventas por razones de liquidez encuentro reversión de rendimientos negativos significativamente m ́as rápida que la que habían encontrado estudios anteriores. Demuestro también que las medidas de liquidez de los activos vuelven a sus valores intrínsecos inmediatamente después de las liquidaciones. Finalmente, demuestro que una estrategia de provisión de liquidez genera rendimientos positivos económicamente significativos.
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Lee, Kuan-Hui. "Liquidity risk and asset pricing." Columbus, Ohio : Ohio State University, 2006. http://rave.ohiolink.edu/etdc/view?acc%5Fnum=osu1155146069.
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Russo, Agostino. "Asset allocation under liquidity constraints." Thesis, Imperial College London, 2003. http://hdl.handle.net/10044/1/8477.
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Dai, Kai. "Liquidity shocks and SEO underpricing." Thesis, University of Nottingham, 2012. http://eprints.nottingham.ac.uk/12627/.
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We hypothesise that certain market conditions could lead to liquidity shocks that will consequently increase SEO underpricing (defined as the close-to-offer return). We propose three scenarios of market conditions, namely aggregate issues with large volume, large market declines and market volatility. Using a sample of about 5,000 seasoned equity offerings from 1987 to 2009, we found that market volatility is significantly and positively related to SEO underpricing after controlling for other factors. We employed an estimation method proposed by Chambers and Dimson (2009) to examine the behaviour of SEO underpricing over our sample period from 1987 to 2009. We found that after controlling for changing risk composition, price practice, market conditions and the influence of underwriter reputation and analyst coverage, there was still an upward shift in SEO underpricing over the sample period, and the pattern cannot be fully explained by the practice of setting offer prices at lower integers. We borrowed the investment banking power hypothesis from the literature and argued that the upward shift of SEO underpricing over the sample period could be explained by the increase of investment banking power. As the industry structure of underwriting transfers from a competitive market to an oligopoly market, banks use non-price dimensions to gain market power and consequently increase SEO underpricing.
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Panyanukul, Sakkapop. "Liquidity and international bond pricing." Thesis, University of Warwick, 2010. http://wrap.warwick.ac.uk/35533/.
Full textAbstract:
This thesis focuses on the liquidity risk and its impact on bond prices of the international markets and comprises three self-contained research papers. In the first research paper, we examine the role of the liquidity in the pricing of sovereign U.S. dollar bonds in emerging markets. We extend Acharya and Pedersen’s (2005) liquidity-adjusted capital asset pricing model to the bond market and find that both liquidity level and multiple liquidity risks are priced factors for the expected excess return of U.S. dollar bonds issued by developing countries. The combined effects of liquidity risk and liquidity level can explain as much as 1% per annum extra yield spread for the countries that have higher liquidity betas. Countries, which have a high correlation with the global market or U.S. stock market, have higher required bond returns than low correlation countries. The liquidity factor helps explain the credit spread puzzle of high yields. Our empirical results also support a flight to liquidity across the studied countries and are robust after controlling for bond characteristics and the U.S. risk factors. The second research paper finds that both liquidity level and liquidity risk are important in explaining the cross-section of domestic government bond returns in 39 countries (both emerging and developed) around the world. After controlling for other market factors and bond characteristics, liquidity level and liquidity risk together can explain as much as 0.41% per annum of extra yield for the highest versus the lowest liquidity risk countries, which are China and Argentina respectively. There is also an evidence of liquidity spillovers from the U.S. equity market to domestic bond markets around the world. Employing a conditional model, which allows both time-series and crosssectional variations in liquidity betas, we find that the impact of liquidity risk is time varying across two different regimes: it increases in times of high uncertainty and is always larger in emerging than in developed countries. Nevertheless, the price of risk or premium required by investors for holding this time-varying risk is relatively modest. The third research paper examines whether liquidity spillovers between sovereign bonds are systematic or idiosyncratic in character. A theoretical model is developed, which demonstrates that idiosyncratic spillovers require returns to be correlated, whereas systematic spillovers require volatilities to be correlated. We apply the model to sovereign bonds in 35 emerging markets, aggregated for some analyses into Asian, European and Latin American regions. We find liquidity spillovers mainly from Latin America to the other regions and they are both systematic and idiosyncratic in character. Further cross-sectional analysis (by country) and time-series analysis (by region) show that systematic spillovers are more important than idiosyncratic spillovers. The conclusion is that most liquidity risk across emerging bond markets is systematic and therefore cannot easily be hedged away. This has important implications for portfolio selection by fund managers and for the regulation of systemic risk.
32
Weber, Guglielmo. "Consumption, liquidity constraints and aggregation." Thesis, London School of Economics and Political Science (University of London), 1988. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.262094.
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Lorenzoni, Guido. "Essays on liquidity in macroeconomics." Thesis, Massachusetts Institute of Technology, 2001. http://hdl.handle.net/1721.1/8650.
Full textAbstract:
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2001.Includes bibliographical references.
This thesis includes four essays on the macroeconomic effects of financial market imperfections. The first essay studies the incentives for banks that participate in an interbank market to keep a sufficient level of reserves. It presents a model where, in presence of imperfect insurance against bank-specific shocks, banks keep an inefficiently low ratio of reserves to deposits. A consequence of this is that the interest rate on the money market will fluctuate too much from a second-best perspective. It discusses the potential benefits and risks associated to central bank intervention, and highlights the complementarity between regulatory reserve requirements and stabilization of the interest rate. The second essay (joint with C. Hellwig) studies the ability of banks to issue liquid liabilities while holding only a fraction of their activities in liquid assets. We study the possibility of self-sustaining equilibria in which banks are prevented from abusing their issuing privilege by the threat of losing it in case of default. The third essay is a contribution to the empirics of precautionary savings and shows evidence of a decreasing relationship between household wealth and the variability of consumption expenditure. The evidence is consistent with the presence of a precautionary motive for wealth accumulation. The fourth essay (joint with F. Broner) shows that the time series of the spreads on emerging market bonds appears consistent with the view that international investors supplying funds to these countries are liquidity constrained at times of large price drops.
by Guido Lorenzoni.
Ph.D.
34
Kurlat, Pablo (Pablo Daniel). "Essays on liquidity and information." Thesis, Massachusetts Institute of Technology, 2010. http://hdl.handle.net/1721.1/57999.
Full textAbstract:
Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2010."June 2010." Cataloged from PDF version of thesis.
Includes bibliographical references (p. 126-131).
This dissertation studies the interaction of liquidity and incomplete or asymmetric information. In Chapter 1, I study a dynamic economy with illiquidity due to adverse selection in financial markets. Investment is undertaken by borrowing-constrained entrepreneurs. They sell their past projects to finance new ones, but asymmetric information about project quality creates a lemons problem. The magnitude of this friction responds to aggregate shocks, amplifying the responses of asset prices and investment. Indeed, negative shocks can lead to a complete shutdown in financial markets. I then introduce learning from past transactions. This makes the degree of informational asymmetry endogenous and makes the liquidity of assets depend on the experience of market participants. Market downturns lead to less learning, worsening the future adverse selection problem. As a result, transitory shocks can create highly persistent responses in investment and output. In Chapter 2, I study why firms can choose to be illiquid. Optimal incentive schemes for managers may involve liquidating a firm following bad news. Fragile financial structures, vulnerable to runs, have been proposed as a way to implement these schemes despite their ex-post inefficiency. I show that in general these arrangements result in multiple equilibria and, even allowing arbitrary equilibrium selection, they do not necessarily replicate optimal allocations. However, if output follows a continuous distribution and creditors receive sufficiently precise individual early signals, then there exists a fragile financial structure such that global games techniques select a unique equilibrium which reproduces the optimal allocation. In Chapter 3, I study speculative attacks against illiquid firms. When faced with a speculative attack, banks and governments often hesitate, attempting to withstand the attack but giving up after some time, suggesting they have some ex-ante uncertainty about the magnitude of the attack they will face. I model that uncertainty as arising from incomplete information about speculators' payoffs and find conditions such that unsuccessful partial defenses are possible equilibrium outcomes. There exist priors over the distribution of speculators' payoffs that can justify any possible partial defense strategy. With Normal uncertainty, partial resistance is more likely when there is more aggregate uncertainty regarding agents' payoffs and less heterogeneity among them.
by Pablo Kurlat.
Ph.D.
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Chu, Ka Yin Kevin. "Mutual fund trading and liquidity." Thesis, Massachusetts Institute of Technology, 2010. http://hdl.handle.net/1721.1/57771.
Full textAbstract:
Thesis (S.M.)--Massachusetts Institute of Technology, Sloan School of Management, 2010.Cataloged from PDF version of thesis.
Includes bibliographical references (p. 52-56).
This thesis uses equities holdings snapshots of mutual funds to study their trading patterns. Using quarter and semi-annual holdings of mutual funds, I am able to extract a main trading component with the application of the asymptotic principle component method. This component demonstrates short term predictability of returns over three months, suggesting overall mutual fund trades contain a liquidity trading component that temporarily pushes up stock prices that reverse over the next few months. I also demonstrates that this particular type of liquidity risk is related to other measures of liquidity risk. Therefore, this trading component can be a useful building block in creating a comprehensive measure of liquidity.
by Ka Yin Kevin Chu.
S.M.
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El, Ghandour Laila. "Liquidity risk and no arbitrage." Thesis, Stellenbosch : Stellenbosch University, 2013. http://hdl.handle.net/10019.1/79975.
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Thesis (MSc)--Stellenbosch University, 2013.ENGLISH ABSTRACT: In modern theory of finance, the so-called First and Second Fundamental Theorems of Asset Pricing play an important role in pricing options with no-arbitrage. These theorems gives a necessary and sufficient conditions for a market to have no-arbitrage and for a market to be complete. An early version of the First Fundamental Theorem of Asset Pricing was proven by Harrison and Kreps [30] in the case of a finite probability space. A more general version was proven by Harrison and Pliska [31] in the case of a finite probability space and discrete time. In the case of continuous time, Delbaen and Schachermayer [19] introduced a more general concept of no-arbitrage called "No-Free Lunch With Vanishing Risk" (NFLVR), and showed that for a locally-bounded semimartingale price process NFLVR is essentially equivalent to the existence of an equivalent local martingale measure. The goal of this thesis is to review the theory of arbitrage pricing and the extension of this theory to include liquidity risk. At the current time, liquidity risk is a key challenge faced by investors. Consequently there is a need to develop more realistic pricing models that include liquidity risk. We present an approach to liquidity risk by Çetin, Jarrow and Protter [10]. In to this approach the liquidity risk is embedded into the classical theory of arbitrage pricing by having investors act as price takers, and assuming the existence of a supply curve where prices depend on trade size. This framework assumes that the quantity impact on the price transacted is momentary. Using trading strategies that are both continuous and of finite variation allows one to avoid liquidity costs. Therefore, the First and Second Fundamental Theorems of Asset Pricing and the Black-Scholes model can be extended.
AFRIKAANSE OPSOMMING: In moderne finansiële teorie speel die sogenaamde Eerste en Tweede Fundamentele Stellings van Bateprysbepaling ’n belangrike rol in die prysbepaling van opsies in arbitrage-vrye markte. Hierdie stellings gee nodig en voldoende voorwaardes vir ’n mark om vry van arbitrage te wees, en om volledig te wees. ’n Vroeë weergawe van die Eerste Fundamentele Stelling was deur Harrison en Kreps [30] bewys in die geval van ’n eindige waarskynlikheidsruimte. ’n Meer algemene weergawe was daarna gepubliseer deur Harrison en Pliska [31] in die geval van ’n eindige waarskynlikheidsruimte en diskrete tyd. In die geval van kontinue tyd het Delbaen en Schachermayer [19] ’n meer algemene konsep van arbitragevryheid ingelei, naamlik “No–Free–Lunch–With–Vanishing–Risk" (NFLVR), en aangetoon dat vir lokaalbegrensde semimartingaalprysprosesse NFLVR min of meer ekwivalent is aan die bestaan van ’n lokaal martingaalmaat. Die doel van hierdie tesis is om ’n oorsig te gee van beide klassieke arbitrageprysteorie, en ’n uitbreiding daarvan wat likideit in ag neem. Hedendaags is likiditeitsrisiko ’n vooraanstaande uitdaging wat beleggers die hoof moet bied. Gevolglik is dit noodsaaklik om meer realistiese modelle van prysbepaling wat ook likiditeitsrisiko insluit te ontwikkel. Ons bespreek die benadering van Çetin, Jarrow en Protter [10], waar likiditeitsrisiko in die klassieke arbitrageprysteorie ingesluit word deur die bestaan van ’n aanbodkromme aan te neem, waar pryse afhanklik is van handelsgrootte. In hierdie raamwerk word aangeneem dat die impak op die transaksieprys slegs tydelik is. Deur gebruik te maak van handelingsstrategië wat beide kontinu en van eindige variasie is, is dit dan moontlik om likiditeitskoste te vermy. Die Eerste en Tweede Fundamentele Stellings van Bateprysbepaling en die Black–Scholes model kan dus uitgebrei word om likiditeitsrisiko in te sluit.
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Bibow, Jörg. "Essays on liquidity preference theory." Thesis, University of Cambridge, 1995. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.388765.
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Park, Jaepil. "Liquidity, government transfers and sunspots /." free to MU campus, to others for purchase, 2004. http://wwwlib.umi.com/cr/mo/fullcit?p3144449.
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BARADARANNIA, Mohammadreza. "Liquidity And Expected Stock Returns." Thesis, The University of Sydney, 2013. http://hdl.handle.net/2123/9367.
Full textAbstract:
Liquidity is among the primary attributes of many investment plans and financial instruments. In the Financial Services industry, portfolio managers tailor portfolios to fit their clients’ investment horizons and liquidity objectives and consider illiquidity costs in managing their portfolios. The impact of illiquidity on expected stock returns has been the centre of many studies over the past decade. This thesis employs a low-frequency proxy for the effective spreads, recently developed by Holden (2009) and examines three research problems in liquidity-equity pricing. In research problem 1, I re-examine the liquidity effect on expected stock returns in the NYSE over the period 1926–2008, the pre-1963 period, for which there is a lack of research, and the post-1963 period. The results from the entire sample of 1926–2008 show that expected returns increase with the stock level illiquidity. However, illiquidity level has explanatory power in the cross-sectional variation of expected stock returns only over the post-1963 period, and is, both economically and statistically, insignificant for the whole sample and the pre-1963 period. These findings are robust after taking into account various characteristics and risk controls. On the other hand, evidence from the pre-1963 sample suggests that the systematic market liquidity risk is significant in association with cross-sectional expected stock returns. Nevertheless, the most accurate evidence is provided over the entire sample. The analysis over the whole period of 1926–2008 shows that the systematic liquidity risk plays a significant role in the cross-sectional variation of expected stock returns. In research problem 2, I investigate whether the effect of liquidity on equity returns can be attributed to the liquidity level, as a stock characteristic, or a market-wide systematic liquidity risk. I develop a CAPM liquidity-augmented risk model and test the characteristic hypothesis against the systematic risk hypothesis for the liquidity effect. I find that the two-factor systematic risk model explains the liquidity premium. The hypothesis that the liquidity characteristic is compensated irrespective of liquidity risk loadings is not supported in the data. This result is robust over 1930–2008 data and subsamples of pre-1963 and post-1963 data both in the time-series and the cross-sectional analysis. The results demonstrate that the liquidity augmented CAPM approach is the correct way to incorporate the liquidity risk. In research problem 3, I explore liquidity costs as the explanation for the idiosyncratic volatility premium documented in the literature. Liquidity costs may affect the estimation of idiosyncratic volatility through the microstructure-induced noise in closing equity returns. I eliminate the microstructure influences from the returns and re-estimate the idiosyncratic volatility. I show that liquidity can explain the pricing ability of idiosyncratic volatility reported in the literature for value-weighted portfolios after controlling for the three Fama–French factors and also the Carhart momentum factor. The findings are robust in both the regression and double sorting portfolio analyses. The results from the equally-weighted portfolios indicate that idiosyncratic volatility cannot predict returns ahead either before or after correcting for the microstructure-induced bias. This research provides new empirical evidence which can assist academics, portfolio managers and practitioners to develop a broader understanding of the impact of liquidity costs on stock returns, and to incorporate liquidity in their pricing models.
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Rodrigues, Diego de Sousa. "Liquidity constraints and collateral crises." reponame:Repositório Institucional do FGV, 2018. http://hdl.handle.net/10438/23943.
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Asset-backed securities were widely traded. Arguably, this happened because they were complicated claims, in the sense that it was very costly to assess their fundamental value. Here, we show that if this is the case, then the emergence of alternative ways to address liquidity needs, by undermining the liquidity role of these assets and reinforcing the relevance of their fundamental value, may increase the incentives to acquire information about them, and negatively impact the credit market. Hence, our results suggest that it is easier for these assets to accomplish the role of private money when there are fewer alternative ways to address liquidity needs.
Os títulos lastreados em ativos eram amplamente negociados. Provavelmente, isso aconteceu porque eram títulos complicadas, no sentido de que era muito custoso avaliar seu valor fundamental. Aqui, mostramos que, se este é o caso, então o surgimento de formas alternativas de atender às necessidades de liquidez, ao enfraquecer o papel de liquidez desses ativos e reforçar a relevância de seu valor fundamental, pode aumentar os incentivos para obter informações sobre eles e impactar negativamente o mercado de crédito. Portanto, nossos resultados sugerem que é mais fácil para esses ativos desempenharem o papel do dinheiro privado quando há menos formas alternativas de atender às necessidades de liquidez.
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Zheng, Chen. "Three Essays on Bank Liquidity." Thesis, Curtin University, 2017. http://hdl.handle.net/20.500.11937/66691.
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This thesis empirically examines three distinct but interrelated bank liquidity topics. In the first study, the impact of bank capital on the relationship between bank liquidity creation and bank failure risk is explored. The second study determines whether government bailout policy affects the liquidity holdings and liquidity creation of banks, whilst the third study investigates the effect of social capital on bank liquidity holdings.
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Atamanyuk, R. O. "Liquidity." Thesis, 2012. http://essuir.sumdu.edu.ua/handle/123456789/26087.
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Chen, Hsiao-Chuan, and 陳孝全. "Commonality in Liquidity & Liquidity Adjusted VaR." Thesis, 2004. http://ndltd.ncl.edu.tw/handle/52183533106402438229.
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Chung, Hsin-Chieh, and 鍾欣潔. "Will Liquidity Creation Cause Higher Liquidity Risk?" Thesis, 2010. http://ndltd.ncl.edu.tw/handle/79588688632457014574.
Full textAbstract:
碩士國立高雄大學
經營管理研究所
98
Generally liquidity risk is an existence in banks for different degree. However, liquidity risk had not been considered as an important risk until the subprime mortgage liquidity risk. Many large banks bankrupt for liquidity risk, thus people take more serious in manage liquidity risk. The liquidity creation is one of traditional functions of the bank. Berger & Bouwman (2009) proposed liquidity creation is positively to bank's value. The issue is deserved to discuss whether the relationship between liquidity risk and liquidity creation exists or not. We take financial system as dummy variable, using two stage least squares model to estimate bank liquidity risk and liquidity creation. The results show that the relationship between liquidity risk and liquidity creation is negative except to in the market system and when the financial crisis occurred.
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Hua-WunJheng and 鄭驊紋. "The Relation Between Asset Liquidity and Stock Liquidity." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/61733279749011950083.
Full textAbstract:
碩士國立成功大學
財務金融研究所
102
This paper studies the relationship between asset liquidity and stock liquidity in Taiwan-based publicly traded firms. I observe a positive relationship between asset liquidity and stock liquidity. This result implies that the influence of lower uncertainty regarding assets-in-place overwhelms the influence of higher uncertainty about future investment. Furthermore, this relationship can be more positive for firms with fewer growth opportunities or higher financial constraints. Firms with less growth opportunities or higher financial constraint will increase the uncertainty regarding future investment; therefore, the relation will be more positive. My results shed light on the value of asset liquidity.
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Mirza, Baber. "Liquidity planning." Master's thesis, 2017. http://hdl.handle.net/10400.8/2796.
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This report is based on the internship activities I performed at Robert Bosch Benelux
(RBBN), from 26th September 2016 to 31st March 2017. This firm is one of the regional
organization of Robert Bosch GmbH. Robert Bosch GmbH is a private multinational
company engaged in the development of engineering and electronics product. The Bosch
Group is composed of four major business sectors, named mobility solutions, industrial
technology, consumer goods and energy and building technology. Bosch Group desires to
enrich the quality of life with solutions that are both innovative and beneficial. The company
concentrates their core competencies in automotive and industrial technologies. Bosch is
also contributing in the production of products and services for professional and private use.
My exposure at Bosch proved to be extremely fruitful. I gained valuable cultural, practical
and professional experience. In my role as an assistant controller, my financial expertise
developed exponentially. I am a quick learner thus I adapted to the changing needs of the
controlling and finance department with perfect ease. I learnt the importance of deadlines,
teamwork and effectively coordinating in a fast-paced environment. This traineeship resulted
in providing me with a platform to advance my professional prospects.
This report attempts to fulfil one specific requirement of Robert Bosch Benelux, which was
with regards to liquidity planning. Liquidity planning is essential for the survival and
prosperity of any business and it is the foremost gauge of a company’s financial health. The
significance of cash flow in business is often compared to the human anatomy and its
constant need for oxygen. Therefore to gain enhanced understanding of its cash flow Robert
Bosch Benelux provided me with an opportunity to devise a cash flow forecasting
methodology. My foremost contribution towards this project was the development of new
forecasting strategy for the core cash flows of Robert Bosch Benelux. I developed distinctive
forecasting strategy to estimate forecasted account receivables, account payables, salaries,
payroll taxes and value added tax.
The old forecasting methodology was completely discarded due to the fact that new
forecasting methodology was superior. I arrived at this conclusion after a comparison of the
old and new methodology, proven through a percentage forecast error formula. In
conclusion, the new methodology presented significantly improved results, relatively to the
old forecasting methodology at Bosch.
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"Mutual Fund Liquidity Management, Stock Liquidity, and Corporate Disclosure." Doctoral diss., 2020. http://hdl.handle.net/2286/R.I.57267.
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abstract: This study presents the first evidence that mutual fund liquidity management affects both stock liquidity and information disclosure of portfolio firms. Using a difference-in-differences approach that exploits a proposal by the U.S. Securities and Exchange Commission (SEC) as an exogenous shock to mutual fund liquidity management, I find causal evidence that mutual fund liquidity management improves liquidity of underlying stocks. The liquidity improvement is more pronounced when mutual funds have stronger incentives to improve portfolio liquidity and more resources to influence firms, and when portfolio firms have lower stock liquidity and higher information asymmetry prior to the SEC proposal. I further show that mutual funds may exert pressure on portfolio firms to improve their disclosure as a channel to improve stock liquidity. Overall, the results indicate that liquidity management at the fund level has important implications for stock liquidity and information disclosure of portfolio firms.Dissertation/Thesis
Doctoral Dissertation Accountancy 2020
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Chen, Chien-Nan, and 陳建男. "Extreme Downside Liquidity Risk、Linear Liquidity Risk and Asset Pricing." Thesis, 2013. http://ndltd.ncl.edu.tw/handle/76227377077944149746.
Full textAbstract:
碩士國立中山大學
財務管理學系研究所
101
Many serious financial crises have hit the global financial market over the past decades. In those crises, liquidity could suddenly dries up and liquidity commonality between stocks and market becomes more significant. Liquidity risk is not an easily diversifiable systematic risk, and investor’s wealth and capital also depend on assets’ liquidity when market crashes. This research focuses on the issues of whether liquidity risk is a significant factor in Taiwan capital market. Do investors get liquidity risk premium if they hold the stock which is highly sensitive to market crash? The liquidity risk of a stock represents three different forms:(1) individual stock liquidity sensitivity to market liquidity; (2) individual stock liquidity sensitivity to market return; (3) individual stock return sensitivity to market liquidity .We use Clayton Copula and liquidity-adjusted capital asset model to measure these different liquidity risks, which are extreme downside liquidity risks (EDL) and linear liquidity risks (LLR) respectively. Extreme downside liquidity risk, which is the conditional liquidity risk, emphasizes clustering in the lower left tail 10% dependence of bivariate distribution between individual stock liquidity (return) and market liquidity (return). Linear liquidity risk, which is the unconditional liquidity risk, uses covariance to capture sensitivity between individual liquidity (return) and market liquidity (return). After we control for market risk, size, book to market, and momentum risk factors, we find that liquidity risk is an important determinant of cross-section of expected return. Besides, liquidity risk is also more important than market risk and the level of liquidity. In addition to the liquidity commonality risk, we also find the co-movement risk between individual stock liquidity and market return, and co-movement risk between individual stock return and market liquidity are cared by investors. When market declines, the relationship between liquidity risk and expected return reverses from positive to negative. We use behavior of investors to explain this phenomenon.
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Galy, Sébastien. "Essays in liquidity." Thesis, 2003. http://spectrum.library.concordia.ca/2000/1/NQ78622.pdf.
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Derivatives markets can quickly become illiquid in periods of high uncertainty. Neither the source of this illiquidity nor its implications are well understood. First, this thesis shows that hedgers' trades have an adverse impact on the futures price creating effectively an endogenous transaction cost increasing in times of uncertainty and acting as the source of illiquidity in these markets. Second, illiquidity is shown to strengthen the wealth effect, which has been proven to be too weak empirically to explain the behavior of prices. The wealth effect is the mechanism through which changes in investors' wealth impact their attitude towards risk. As investors lose wealth, they become more risk averse and ask for a higher compensation to hold a risky asset thereby decreasing its price. Third, illiquidity is shown to potentially explain the shape of the implied volatility function not only as a function of moneyness but also of the options' volume or open interest. These results are derived from models, where producers maximize their expected utility derived from their profits. They seek to hedge the uncertain price at which they will sell their product in the future. They can use futures or put options to reduce this price risk but must pay speculators, defined as having no position in the underlying asset, a premium. This premium disappears normally as trades are assumed to be too small to matter and the risk of trading perfectly shared. Both of these assumptions are relaxed to derive the illiquidity transaction costs and its implications.
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Huang, Yu-chen, and 黃于珍. "Measuring Liquidity Risk." Thesis, 2002. http://ndltd.ncl.edu.tw/handle/38224446990171041380.
Full textAbstract:
碩士中國文化大學
會計研究所
90
In a much more complicated and volatile financial market, the issue of risk management becomes increasingly important. Whether a financial institution can continue its operation is highly related to its quality of risk control. Value at Risk as and emerging tool of risk management. Value at risk (VaR) provides risk managers feasibility to estimate the maximum loss of investment portfolios through computa-tion of certain numbers. However, conventional value at risk models lack a treatment of liquidity risk. Neglecting liquidity risk leads to an underestimation of overall risk and misapplica-tion of capital for the safety of financial institutions. Standard value at risk model as-sumes that any quantity of securities can be traded without influencing market prices. In reality, most markets are less than perfectly liquid. Recent financial turbulences, as the collapse of long-term capital management , prove that liquidity is a significant risk for market players. The main aim of this article is to demonstrate the importance of the liquidity risk component in financial markets. First, we make a survey of literature explaining how the liquidity risk can be incorporated into one single measure of market risk. Then, apply the liquidity adjusted value at risk model provided by Bangia, Diebold, Schuermann, and Stroughair (1999), and include the liquidity risk would that the overall risk be accurate.