The joint dynamics of liquidity, returns, and volatility across small and large firms
By: Tarun Chordia, Asani Sarkar, Avanidhar Subrahmanyam.
Contributors: Sarkar, Asani.; Subrahmanyam, Avanidhar.; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 207; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 207.
Publisher: Federal Reserve Bank of New York
Published: 2005
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Stocks -- Prices.; Liquidity (Economics)
Description: "This paper explores liquidity spillovers in market-capitalization-based portfolios of NYSE stocks. Return, volatility, and liquidity dynamics across the small- and large-cap sectors are modeled by way of a vector autoregression model, using data that spans more than 3,000 trading days.  We find that volatility and liquidity innovations in one sector are informative in predicting liquidity shifts in the other.  Impulse responses indicate the existence of persistent liquidity, return, and volatility spillovers across the small- and large-cap sectors.  Lead and lag patterns across small- and large-cap stocks are stronger when spreads in the large-cap sector are wider.  Consistent with the notion that private informational trading in large-cap stocks is transmitted to other stocks with a lag, order flows in the large-cap-stock decile predict both transaction-price-based and mid-quote returns of small-cap deciles when large-cap spreads are high"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
"April 2005."
Title from PDF file as viewed on 4/21/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.