Market liquidity and funding liquidity: Empirical analysis of liquidity flows using VAR framework
نویسندگان
چکیده
منابع مشابه
Funding Liquidity and Market Liquidity
Recent empirical studies have shown an increasing co-movement between fund and market liquidity, which is driven by common factors such as monetary shocks. Modeling this comovement becomes desirable to evaluate policies relating to liquidity and financial instability. This paper establishes a monetary model with capital to explain the dynamic interactions between funding and market liquidity in...
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We provide a model that links a security’s market liquidity — i.e., the ease of trading it — and traders’ funding liquidity — i.e., their availability of funds. Traders provide market liquidity and their ability to do so depends on their funding, that is, their capital and the margins charged by their financiers. In times of crisis, reductions in market liquidity and funding liquidity are mutua...
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In this paper we survey the theoretical and empirical literature on market liquidity. We organize both literatures around three basic questions: (a) how to measure illiquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how illiquidity affects expected asset returns. Using a unified model from Vayanos and Wang (2010), we survey theore...
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As the record of Federal Reserve interventions over the past year, from December 2007 to December 2008, makes abundantly clear, a foremost concern of monetary authorities in responding to the financial crisis has been to avoid a repeat of the Great Depression, and especially a repeat of the monetary contraction that Milton Friedman and Anna Schwartz (1963) have claimed as the major cause of the...
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In this paper, we develop an equilibrium model for stock market liquidity and its impact on asset prices when participation in the market is costly. We show that, even when agents’ trading needs are perfectly matched, costly participation prevents them from synchronizing their trades, which gives rise to the endogenous need for liquidity. Moreover, the endogenous liquidity need, when it occurs,...
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ژورنال
عنوان ژورنال: Acta Oeconomica
سال: 2020
ISSN: 0001-6373,1588-2659
DOI: 10.1556/032.2020.00034