TAILIEUCHUNG - Common Determinants of Bond and Stock Market Liquidity: The Impact of Financial Crises, Monetary Policy, and Mutual Fund Flows

There have been some attempts to explain theoretically the behavior of the stock return volatility. Veronesi (1999) constructs a model with regime shifts in the endowments in which investors will- ingness to hedge against their own uncertainty on the true regime generates overreaction to good news in bad times and volatility clustering. In contrast to that paper, I assume that the exogenous state variables are not subject to regimes, neither do they exhibit mean-reversion. For instance, the current paper obtains volatility clustering in equilibrium even when all the exogenous state variables are geometric Brownian motions | Common Determinants of Bond and Stock Market Liquidity The Impact of Financial Crises Monetary Policy and Mutual Fund Flows Tarun Chordia Goizueta Business School Emory University Tarun_Chordia@ Asani Sarkar Federal Reserve Bank of New York Avanidhar Subrahmanyam The Anderson School University of California at Los Angeles subra@ December 11 2001 We thank Michael Brennan Arturo Estrella Michael Fleming Eric Hughson Stavros Peristiani Raghu Rajan and René Stulz for helpful comments and or for encouraging us to explore these issues. We also thank Michael Emmet for excellent research assistance. The views here are those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors are the authors alone. Common Determinants of Bond and Stock Market Liquidity The Impact of Financial Crises Monetary Policy and Mutual Fund Flows Abstract We study common determinants of daily bid-ask spreads and trading volume for the bond and stock markets over the 1991-98 period. We find that spread changes in one market are affected by lagged spread and volume changes in both markets. Further spread and volume changes are predictable to a considerable degree using lagged market returns lagged interest rates lagged spreads and lagged volume. During periods of financial crisis stock and bond spreads and volume are more volatile and become more highly correlated moreover at these times money supply positively affects financial market liquidity albeit with a lag of two weeks. During normal times increases in mutual fund flows enhance stock market liquidity and trading volume but during financial crises . government bond funds see higher inflows resulting in increased bond market liquidity. Overall this study deepens our understanding of the dynamics of liquidity in financial markets and suggests how asset allocation strategies might be designed to reduce .

• Đầu tư Chứng khoán
• Closing Costs
• Refinancing
• Clinical Course
• Survival
• Endoscopic Management
• Palliative Therapy
• costs
• benefits
• gap
• education
• closing
• graduated
• transaction costs
• selling land
• real estate investment
• housing sales skills
• cost of the purchase price
• real estate
• business costs
• budget management
• financial operations
• business operations
• corporate governance
• financial management