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This paper examines the relationship between opacity and frequency dependence of systematic risk (β), estimated over different horizons using Wavelet Transform, for small and large firms. The findings provide evidence for the frequency-specific nature of opacity and suggest that while opacity is positively related to the frequency dependence of beta for large firms at all frequencies, for small firms the relationship is significant at low (long horizon) and insignificant at higher (short horizon) frequencies. • In large firms, opacity is positively related to frequency dependence of beta. • For small firms the relationship is significant only at low frequencies. • Frequency dimension of risk is crucial in selecting assets for a portfolio. • Ignoring investment horizon leads to biased estimates of systematic risk. • The frequency dependent CAPM is a step toward more accurate systematic risk. [ABSTRACT FROM AUTHOR]

After lively debates on whether there was too much trading in the Korean derivatives market, the Korean government decided in 2016 to introduce a capital gains tax on KOSPI 200 futures and options. The stated goals were to secure tax revenue and restrict speculative trading. This article aims to assess the impact of this tax on the liquidity of the Korean derivatives market. We take advantage of an ad hoc delay between the taxation of KOSPI and Mini-KOSPI derivatives to apply a difference-indifferences analysis. The introduction of the capital gains tax reduced market activity for KOSPI 200 derivatives, but its extension to Mini-KOSPI 200 derivatives had no significant impact. Moreover, we do not find any significant effect on the bid–ask spread. A closer look at different types of traders also shows a decrease in the trading activity of individuals, compared to other traders who are exempt. • A capital gains tax (CGT) has been introduced on Kospi 200 derivatives in 2016. • The CGT has been extended to Mini-Kospi 200 derivatives 6 months later. • The introduction of the CGT reduced activity, but its extension had no impact. • The CGT had no significant effect on the bid-ask spread. [ABSTRACT FROM AUTHOR]

• Examines the impact of cash holdings on mutual fund returns using daily data. • Highlights inefficient cash utilization leading to diminished profits in mutual funds. • Emphasizes the need for advanced liquidity management tools in mutual funds. • Suggests balanced regulatory approaches for cash holding and transparency in mutual funds. Mutual funds have traditionally attracted retail investors seeking diversified market exposure. While the focus has historically been on asset liquidity and quality, recent attention has turned to assessing fund liquidity and the risks of asset fire sales. Our study analyzes Israeli mutual funds' daily holdings and flows over an extensive eight-year period, revealing a significant issue: fund managers tend to maintain excessive cash levels, burdening the industry by more than 2 % of assets under management (AUM). These findings highlight the urgency of implementing advanced liquidity management tools to navigate redemption risks effectively. Moreover, our research stresses the need for flexible, market-oriented regulations and enhanced industry transparency. By establishing liquidity risk management guidelines, regulators can optimize investor returns and mitigate potential systemic risks associated with cash allocations in mutual funds. [ABSTRACT FROM AUTHOR]

• Key US macroeconomic news are closely followed by stock market investors in Turkey. • We investigate the immediate effects of releases on price-, quantity- and time-based measures obtained from limit order book and tick-by-tick trade data capturing liquidity, returns, volatility and the whole trading activity at stock level in Borsa Istanbul. • Upon releases, delayed trades are executed, liquidity is consumed, (negative) returns are significant and volatility is higher. We investigate the effects of macroeconomic announcements made in the United States on trading activity of stocks listed in Borsa Istanbul. The influence of these releases on the selected variables are an important source of information for market participants. Results show a clear negative impact on weighted bid, ask and mid-prices in the five-minute period post-release. Available liquidity measured by pending orders in limit order book decreases with the news arrival. These results present implications for market dynamics and signal that liquidity consumption (through market orders) largely dominates liquidity provision (through limit orders) in the five-minute period following the release. [ABSTRACT FROM AUTHOR]

• 973 forms of cryptocurrency and 30 international indices are investigated. • Construct value-weighted and equal-weighted cryptocurrency composite indices (CCI). • In generally, cryptocurrency is a not a hedge for most of the international indices. • Safe haven property is more pronounced in subgroup with larger market capitalization and higher liquidity. • Safe haven property is more pronounced in developed markets. Current literature on the hedge or safe haven property of cryptocurrency focuses exclusively on a few number of the cryptocurrency. This paper gives a detailed observation by including 973 forms of cryptocurrency and 30 international indices from a dynamic perspective. The empirical results mainly show that: (1) generally, cryptocurrency is a safe haven but not a hedge for most of the international indices; (2) the safe haven property is more pronounced in subgroups with larger market capitalization and higher liquidity; and (3) the safe haven property is more pronounced in developed markets. [ABSTRACT FROM AUTHOR]

• Hurricane Sandy's impact on utility industry liquidity and trading. • Utility stocks negative effects compared to non-utility stocks. • Natural Gas Distribution segment prolonged post-hurricane liquidity challenges. This study examines the impact of Hurricane Sandy on liquidity and information-based trading in the utility industry. Compared with non-utility stocks, Hurricane Sandy has a significant adverse impact, implying higher trading costs and instability for investors during this disaster. Segmenting NAICS codes reveals a more pronounced impact on the liquidity of Natural Gas Distribution and Water, Sewage, and Other Systems. While liquidity in the Electric Power Generation and Water segments returns to normal levels one month after the hurricane, the Natural Gas Distribution segment continues to face liquidity challenges, presumably due to lingering infrastructure damage and supply chain disruptions. [ABSTRACT FROM AUTHOR]

• Formulate the time-consistent mean-variance hedging for an illiquid asset using a cointegrated liquid asset. • Solve for the explicit closed-form equilibrium hedging strategy. • Demonstrate improvement in hedging effectiveness of the novel hedging solution with real empirical data. When a financial institution has a difficulty to close a position in an illiquid asset, a practical solution is to hedge the risk of the position with a related liquid asset. This may frequently occur in insurance institutions who diversify asset allocation by illiquid investment and face high transaction costs when try to close the illiquid asset position. A conventional approach constructs optimal hedging based on the correlation between the liquid and illiquid assets. We show, however, that ignoring the serial dependence through cointegration significantly reduces the hedging effectiveness. This paper investigates the time-consistent mean-variance optimal hedging using cointegration for the risk of a non-traded portfolio. Specifically, only the investment amount in the liquid asset is the control variable. The mathematical challenge stems on the derivation of the optimal equilibrium strategy when we have to deal with cointegration, illiquidity and time-inconsistency simultaneously. Using a stochastic differential game approach, we characterize the equilibrium hedging strategy from a system of partial differential equations that involves an HJB equation for the time-consistent problem with cointegration. Novel solutions to the equilibrium strategy and the efficient frontier are obtained in explicit closed-form formulas. The significance of cointegration in the corresponding hedging problem is evidenced with real empirical data. [ABSTRACT FROM AUTHOR]

Highlights • The average trading cost is introduced as the effective depth measure of the liquidity. • Local resilience is introduced to measure how fast the effective depth narrows in a moving time window. • Empirical study on the E-mini future market suggests that trade size is larger during periods of high liquidity. • The existing limit order book has a large impact on the future order flow. Abstract We develop a three dimensional liquidity measure to study the interaction between liquidity and order flow in the E-mini S&P 500 index future market. We show that trade size is larger during periods of high liquidity. Particularly, the thicker the depth of the limit order book, the larger the resilience, the narrower the bid-ask spread, the larger the trade size could be. [ABSTRACT FROM AUTHOR]

We examine the reactions of the cryptocurrency market to two events that occurred during the escalation of the Russia–Ukraine war in February 2022. Using hourly data, we find that the escalation exerted a negative influence on both liquidity and returns. Interestingly, the actual escalation triggered a more pronounced drop than the threat of escalation shortly before. This contrasts with the stock market, where threats of geopolitical events are found to have a greater impact. Post-escalation, we observe indications of increased demand for cryptocurrencies, potentially as a means to circumvent Western sanctions imposed on Russia or to provide aid to Ukraine. • Cryptocurrencies react more to an actual geopolitical event than to the threat of it. • The Russia–Ukraine war escalation hurt cryptocurrency liquidity and returns. • Post-escalation, crypto demand rose, possibly to bypass sanctions or provide aid. [ABSTRACT FROM AUTHOR]

Abstract We examine liquidity skewness by providing an analysis of bid-ask spreads for a comprehensive high-frequency dataset comprising Eurozone countries’ sovereign bonds. European sovereign bond markets exhibited increasing positive skewness over the sample period which was most extreme for Greece, Ireland and Portugal. We argue that positive skewness reflects decreased liquidity during volatile periods. We also report negative skewness in 2007. This can be explained by a feature of the limit-order book rubric of the MTS market where market-makers can submit limit-orders that are more competitive than the current best-price to reduce unwanted inventory without having to execute a market-order. [ABSTRACT FROM AUTHOR]

Highlights • We examine the impact of investor sentiment on liquidity of 12 emerging stock markets. • We also extend our analysis to examine the role of foreign investor sentiment on aggregate emerging market liquidity. • We find positive (negative) impact of foreign and domestic investor sentiment on emerging markets liquidity (illiquidity). Abstract This study examines the impact of local and foreign investor sentiment on emerging stock market liquidity. We find a positive (negative) effect of investor sentiment on liquidity (illiquidity). Results also reveal that foreign investor sentiment significantly influences emerging stock market liquidity. [ABSTRACT FROM AUTHOR]

The paper seeks to determine whether short selling increases or decreases liquidity in U.S. equity markets. On one hand, prior research indicates that short sellers may act, at times, as liquidity providers. On the other hand, other research in market microstructure argues that spreads will widen in the presence of informed traders – a classification generally given to short sellers. Results from a series of new, multivariate time-series tests show that exogenous shocks to short selling activity generally lead to a widening of bid-ask spreads in smaller-cap stocks. The results, however, do not hold for larger-cap stocks. [ABSTRACT FROM AUTHOR]

• The liquidity of corporate bonds significantly impacts credit spreads. • Corporate bonds issued in less economically developed regions drive our finding. • The risk compensation required by investors affect the credit spread. • Our finding provides policy implication to regulators. We examine corporate bond liquidity's impact on credit spreads for listed companies in China. An empirical study is conducted by selecting monthly trading data of the listed company bond market from January 2011 to June 2020. It is found that the better the liquidity of listed corporate bonds in China, the smaller the risk compensation required by investors and the smaller the credit spread. This effect is more significant in periods of illiquidity. In addition, only the liquidity of corporate bonds issued by issuers in less economically developed regions significantly affects credit spreads. [ABSTRACT FROM AUTHOR]

Using a global panel dataset of 3,496 green bonds and conducting regressions, we find a positive relationship between greenness ratings from second-party opinions (SPOs) and green bond liquidity. Green bonds from corporate and municipal issuers with a greenness rating show higher liquidity than green bonds without a greenness rating. For financial institutions and other public issuers besides municipalities, we find no effect of greenness ratings on green bond liquidity. • We find a positive relationship between greenness ratings and green bond liquidity. • This relationship holds for green bonds from corporate and municipal issuers. • This relationship does not differ between dark green and medium green bonds. [ABSTRACT FROM AUTHOR]

This paper examines the role of Diamond-Dybvig banks when financial markets exist. Previous studies have shown that banks are redundant when financial markets are available. This paper shows that is not true when the asset price risk is considered. Asset price risk makes the liquidation value of the assets uncertain. Therefore holding the asset directly is risky for the consumers who are subject to liquidity shocks. Banks can provide a deterministic return to the depositors since the aggregate withdrawal is predictable and therefore the banks do not have to liquidate the asset in the market. [ABSTRACT FROM AUTHOR]

Information arrivals may drive investors to require immediacy, generating sudden liquidity demand across multiple price levels in limit order books. We document significant intraday changes in stock limit order book characteristics and liquidity beyond the best levels around scheduled and non-scheduled company announcements. At aggregated level, liquidity beyond the best levels behaves quite differently from the bid–ask spread around scheduled announcements. Moreover, scheduled announcements improve multi-level liquidity to an exceptionally good level. We also provide evidence for pre-reactions in order books before non-scheduled announcements, which suggest the possibility of information leakage. [ABSTRACT FROM AUTHOR]

• We apply CATFIN to measure systemic risk for the top 100 cryptocurrencies over the period 1/01/2019–28/11/2022. • The FTX crisis did not engender higher systemic risks in this market compared to previous negative shocks. • Illiquidity mimics the systemic risk pattern. The crypto market has experienced several serious crises in recent years, the most contemporary being the collapse of Terra and then FTX. Despite common belief that these could imply the end of the crypto era, our analysis highlights no significant increases and decreases in systemic risk and liquidity, respectively. [ABSTRACT FROM AUTHOR]

• This paper investigates MFIs cash holding behavior over the business cycle. • Cash holding behavior in MFIs is countercyclical (negative relationship). • The negative relation concerned for-profit MFIs. • This countercyclical effect depends on the quality of assets held by MFIs. • This countercyclical effect depends on MFIs ability to target wealthier borrowers. This study aims to determine whether the cash holdings of financial organizations with a social mission respond to the business cycle. Applying a matching approach to an international sample of 8,271 MFI-year observations over the period 2003–2018, we find that liquidity in financial organizations with a social mission is countercyclical (negative co-movement). Our results also suggest that profit-oriented institutions exhibit countercyclical cash holding behavior. Finally, we observe that this countercyclical effect depends both on the quality of assets held by MFIs and their ability to target borrowers with a greater ability to repay loans during bad times. [ABSTRACT FROM AUTHOR]

The 2010 new quote rule changes imposed on the exchange market primary dealers (PDs) for the Korea Treasury Bonds (KTBs) have increased the exchange market quality for the 5-, 10- and 20-year maturity KTBs. Knock-on effects have subsequently led to an increase in market quality for the 5- and 10-year maturity bonds in the over-the-counter (OTC) KTB market. However, the imposition of a spread width below a reasonable level in the KTB exchange traded market for the 3-year maturity KTB has led to a significant reduction in trade volume in the OTC KTB market for bonds of the same maturity. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of the financial crisis on the probability of default (PD) for a large Dutch mortgage portfolio covering a period from 2001 until 2012. A statistical model has been developed, which determines the likelihood that a healthy mortgage customer defaults within 12 months. The PD model is based on risk drivers which are related to the characteristics of the customers and their products (internal risk drivers) and to market factors such as stock market illiquidity, GDP, unemployment and house price index (external risk drivers). Data shows that the financial crisis did not seem to have had the expected worsening impact on the observed customer defaults. However, this is the result of simultaneous debt collection improvements. This paper shows how the internal drivers of the model are able to pick up the effect of the collection process improvements (decrease in PD), whereas the external drivers add significant value to the model to also address the crisis effect (increase in PD). [ABSTRACT FROM AUTHOR]

Using a comprehensive sample of China's agricultural futures from 2010 to 2015, we investigate the relation between trading activities and futures markets liquidity, returns and volatilities. We find that contemporaneous order imbalances are positively related to returns. Order imbalance caused by price pressure lasts more than one day indicating difficulty in absorbing excess buy and sell orders. We also find that lagged order imbalance can predict current returns and that the effect of order imbalance on liquidity is limited. These results are consistent with the explanation that speculative trading not liquidity hinders the Chinese agricultural futures markets to accommodate excess order imbalance. [ABSTRACT FROM AUTHOR]

Between 1893 and 2007, a securities transaction tax (“ Impôts sur les opérations de bourse ”) was levied on the French market. In this paper, I assess the impact of the tax abrogation. Using a difference-in-difference approach, I find no impact on market liquidity and volatility. [ABSTRACT FROM AUTHOR]

This research investigates and tests for the presence of time-of-the-day effects on the Bitcoin network. Results indicate that NYSE trading sessions lead Bitcoin trading activity, both on the blockchain and centralised exchanges. Effects are found to have strengthened over time, however, simultaneously diminished at the weekend indicating significant exchange interactions, and that Bitcoin has developed somewhat outside its intended design parameters and is influenced by other forces such as those originating from NYSE trading. While proponents consider Bitcoin trading to be '24/7', our findings suggest that both transaction and on-chain network activity are best described to be, at best, '12/5', presenting significant implications for traders, with regards to centralised exchange liquidity and the speed of their transaction inclusion on the blockchain. Finally, the role and influence of both algorithm and volatility traders cannot be eliminated. • We investigate the presence of time-of-the-day effects on the Bitcoin network. • Results indicate that NYSE trading sessions lead Bitcoin trading activity. • Effects are found to have strengthened over time, but have reduced at the weekend. • Results indicate that fluid transaction and network activity is closer '12/5' than '24/7'. • The disruptive influence of algorithm trading cannot be eliminated. [ABSTRACT FROM AUTHOR]

This study examines the effects of technological changes on liquidity of stock markets. Utilizing daily data of 361 stocks from 10 emerging market exchanges, namely Colombia, Indonesia, Johannesburg, Korea, Malaysia, Mexico, Russia, Shanghai, Shenzhen and Thailand, a panel data regression analysis shows that technological upgrade decreases the bid-ask spread and increases trading activity. In other words, launching a more sophisticated trading platform contributes to the overall liquidity of the market. [ABSTRACT FROM AUTHOR]

We re-examine the impact of short-sale constraints (SSC) on market stabilization via realized jump activities during 2002–2009 to circumvent the reverse causality in identifying the policy effects of SSC. We observed that the abnormal downturns under tighter short sale constraints are significantly larger whereas there is no difference for abnormal upturns. Our empirical results survive across a sequence of robustness examinations controlled for market illiquidity. The findings do not support the claims by regulators that restraining short-sales can stabilize prices; instead, SSC has led to a less efficient market with stronger extreme downward returns. [ABSTRACT FROM AUTHOR]

• We explore the impact of Government Interventions on ADRs volatility and liquidity. • We explore both economic and non-economic measures on 387 ADRs from 34 countries. • Interventions amplify ADRs volatility and widen their spreads. • The adverse effect is robust and independent from the severity of COVID-19. • The negative effect holds for developed and emerging markets. This paper examines the impact of COVID-19 related governments' interventions on the volatility and liquidity of American depository receipts (ADRs). Using a wide dataset of 387 ADRs from 34 countries around the globe, we provide an examination of the effect of economic and non-economic interventions on the quality of these cross-listed securities. Our results suggest that closures, restrictions, as well as containment health steps implemented during the outbreak period of the pandemic, seem to deteriorate the ADRs' liquidity and stability. The negative impact holds for different control variables and regression specifications and is not subsumed by the inclusion of the daily confirmed cases as a proxy for the severity of the pandemic. The information documented here may assist financial market participants in their risk management. The findings could also be important for policymakers for their preparedness plans in case of future crises. [ABSTRACT FROM AUTHOR]

• We introduce a MSM three-factor model for cryptocurrencies. • We observe the existence of momentum effects but not reversal effects. • Momentum returns increase as market capitalization gets smaller. • This MSM three-factor model outperforms the Q-C-CAPM of Shen et al. (2020). Shen et al. (2020) propose a three-factor pricing model for cryptocurrencies by including market, size, and reversal factors. However, evidence from cryptocurrencies during a more recent sample period suggests the existence of a momentum effect rather than a reversal effect. Consequently, we introduce and test a three-factor pricing model including market, size, and momentum factors (MSM three-factor model). This MSM three-factor model outperforms the quasi-cryptocurrency CAPM (Q-C-CAPM) of Shen et al. (2020), with greater explanatory power. [ABSTRACT FROM AUTHOR]

• Analysis of tick size reduction using threshold autoregressive model and smooth transition autoregressive model. • In the threshold autoregressive model, the state changes before the tick size change date in Phase 1 and 2. • In the smooth transition autoregressive model, in Phase 1, the state changes before the tick size change date. • In the smooth transition autoregressive model, in Phase 2, the state changes after the tick size change date. "Tick size" is the minimum subdivision of price at which investors can buy or sell an asset in a financial market. Tick size is reduced to improve market quality and liquidity. This study analyzes the volume dimension of liquidity—specifically, trading volume—to determine the time of impact of the 2014 tick size reduction policy, implemented in two phases (P1 and P2) by the Tokyo Stock Exchange. Threshold autoregressive (TAR) and logistic smooth transition autoregressive (LSTAR) models are used to estimate this time of impact. The results show that the use of the TAR model changed the trading volumes for P1 and P2 on December 13, 2013, and June 30, 2014, respectively. With the addition of the LSTAR model, the trading volumes of P1 and P2 changed on December 16, 2013, and September 3, 2014, respectively. These results suggest that empirical studies on tick size reduction need longer interruptions. [ABSTRACT FROM AUTHOR]

• We examine liquidity before during and after the Covid19 crisis. • We find that liquidity and price of various cryptocurrency products have become interrelated. • We hypothesise that this may be down to safe haven flows in the face of the Covid event. We examine the interactions between cryptocurrency price volatility and liquidity during the outbreak of the COVID-19 pandemic. Evidence suggests that these developing digital products have played a new role as a potential safe-haven during periods of substantial financial market panic. Results suggest that cryptocurrency market liquidity increased significantly after the WHO identification of a worldwide pandemic. Significant and substantial interactions between cryptocurrency price and liquidity effects are identified. These results add further support to the argument that substantial flows of investment entered cryptocurrency markets in search of an investment safe-haven during this exceptional black-swan event. [ABSTRACT FROM AUTHOR]

Abstract: This paper implements empirical tests of the recently proposed float-adjusted return model by using Chinese stock-market data. The results show that variation in free float can explain cross-sectional variation in asset returns by about 6.7% annually, after we control for market risk, size, and book-to-market equity. In addition, we also find that size and book-to-market equity help explain cross-sectional variations in returns even after controlling for free float. [Copyright &y& Elsevier]

• I show that there is in general a positive relationship between the volatility of liquidity and returns for large capitalization cryptocurrencies. • This effect indicates that investors demand compensation for liquidity risk. • The effect is not present for the most liquid and popular cryptocurrency; Bitcoin. • Increasing liquidity over time in cryptocurrencies is found, though with a high variation over time. In this paper I document a positive relation between the volatility of liquidity and expected returns. Specifically, I analyze the relationship between the idiosyncratic volatility of market liquidity and the returns of the five largest cryptocurrencies by market capitalization. I find that the correlation between liquidity volatility and returns is overall significantly positive, but highly time-varying. This implies that investors demand a premium for a high variation in liquidity volatility. I furthermore find that the correlation between returns and the level of liquidity is mostly positive, thus, when liquidity is low, expected returns are high. The results corroborates results from other financial markets. [ABSTRACT FROM AUTHOR]

Abstract: We analyze a dynamic market where outsiders share part of the information about a security with a corporate insider and update their incomplete information by learning from disclosed insider trades. Particular focus is on the insider''s response to increasing number of learning outsiders. [Copyright &y& Elsevier]

Abstract: Market participants with large orders to execute are often reluctant to expose these to an open order book in their entirety in order to avoid a potential adverse market impact. Therefore, investors often split large orders into smaller tranches. Iceberg orders facilitate these trading practices by executing such business automatically in the order book. This article analyzes the rationale for the use of iceberg orders by assessing the costs and benefits of this trading instrument. [Copyright &y& Elsevier]

In this paper, we explore the result of Epstein [Int. Econ. Rev. 21 (1980) 269] using a more general utility function that incorporates Kreps–Porteus preferences. We demonstrate that consumers postpone a commitment to non-durable consumption and hold more liquid assets not only by a high degree of intertemporal substitution but also by a preference for the early resolution of uncertainty. We also discuss a potential advantage of Kreps–Porteus preferences in examining the interaction between asset pricing and liquidity demand. [Copyright &y& Elsevier]

• Due to Covid 19, six European countries implemented short-selling bans. • Regulators' aim to prevent price declines and reduce volatility failed. • Results are lower liquidity and trading volumes, wider bid-ask spreads. • More negative effects for smaller markets and firms. • Evidence supports countries resisting implementing a ban. Responding to the dramatic price declines during the Covid-19 pandemic, six European countries introduced short-selling bans in March 2020. We analyze how these restrictions affected the market quality by comparing countries with and without bans. We observe for ban countries relatively lower market liquidity, lower trading volume, and wider bid-ask spreads. Moreover, regulators' aim to prevent price declines and reduce volatility failed, as ban and no-ban countries reveal no differences and prices increased. Our results clearly detail the negative market-quality effects resulting from restrictions, especially for smaller markets and firms. Consequently, this regulatory interference did not protect but harmed investors. [ABSTRACT FROM AUTHOR]

• The private information of order flow has a persistent impact on prices, and in turn, causes short-term predictability of returns • The return-OIB relationship congeals, when the bid-ask bounce related reversal is contained • The arrival of information appears to impact the deeper levels of limit-order book, which alludes to the presence of informed traders beyond the best quotes • The study supports the information asymmetry paradigm of market microstructure for the pure order-driven market of India This article examines the information content of order imbalance (OIB), using 195 most active stocks from the National Stock Exchange of India. The private information of order flow has a persistent impact on prices, and makes the short-term returns predictable. The predictability appears strong for the first five minutes, and perishes within thirty minutes. Furthermore, the information inherent in the order flow impacts the deeper levels of limit-order book, indicating the presence of informed traders beyond the best quotes. Overall, the results support the information asymmetry hypothesis for the pure order-driven market of India. [ABSTRACT FROM AUTHOR]

• We examine the effects of positive and negative news on cryptocurrency liquidity. • 5 positive and 5 negative news events are included in the event study. • We find the news effects on cryptocurrency liquidity are asymmetric and the existence of information leakage before the news announcements. We analyze the effects of positive and negative news on the liquidity of 100 largest cryptocurrencies in an event study context. We find that the liquidity of cryptocurrencies increases (decreases) after positive(negative) news announcement. The effects of positive news persist longer than that of negative news. We also reveal evidence that there is information leakage ahead of the news announcements, and the positive (negative) news produce an increase (decrease) in the cryptocurrency returns. [ABSTRACT FROM AUTHOR]

• We study impacts of the Covid-19 panic on liquidity of emerging market (EM) bonds. • We analyze the bid/offer spread dynamics for investment grade and high yield debt. • We find that the bottom of liquidity crisis was reached in the second half of March. • While EM bond liquidity has improved, the pre-crisis levels have not been yet reached. • EM financials are more resilient to liquidity shocks than corporates and sovereigns. • Post-Covid credit spreads recover rather slowly because of default risk repricing. We analyze liquidity of the emerging market (EM) bonds during the Covid-19 fueled uncertainty. Using bid/offer spreads we demonstrate that the apogee of both, liquidity and credit stresses is reached in late-March, and that although liquidity has improved since then, it has not yet returned to the pre-Covid levels. In particular, we find that the EM financials are more resilient to liquidity shocks than the EM corporates and sovereigns. Moreover, we observe a decoupling in the dynamics of the liquidity and credit risk metrics, as credit spreads have been tightening very slowly due to the Covid-19-triggered repricing of default risk. [ABSTRACT FROM AUTHOR]

• We investigate the relationship between liquidity and the distribution of returns. • We measure the distribution of returns by skewness and kurtosis. • We find a strong relationship between skewness and kurtosis, and liquidity. We investigate the relationship between liquidity and the distribution of returns, for all listed firms on the London Stock Exchange between 2002–2018. We find a strong relationship between the distribution of returns, as measured by skewness and kurtosis, and liquidity. [ABSTRACT FROM AUTHOR]

• We analyze the liquidity of 4 cryptocurrencies traded on 4 exchanges over a 4-year period. • Liquidity is compared across cryptocurrencies and across exchanges. • Bitcoin is the most liquid cryptocurrency and Coinbase Pro is the most liquid exchange. • Liquidity of cryptocurrencies depends on variables specific to cryptocurrencies and is unrelated to general financial market variables. We analyze the liquidity of four cryptocurrencies on four large trading venues over a four-year period. We estimate the Abdi-Ranaldo spread estimator from hourly transactions data and compare liquidity across cryptocurrencies and exchanges. In order to identify the drivers of cryptocurrency liquidity we analyze a broad set of explanatory variables from general financial markets, global cryptocurrency markets as well as variables specific to each exchange-currency pair. Volatility of cryptocurrency returns, the dollar trading volume and the number of transactions are the most important determinants of liquidity while general financial market variables have no explanatory power. [ABSTRACT FROM AUTHOR]

• Increase in COVID-19 cases/deaths increase stock market volaility and illiquidity. • Lockdowns/Reduced Mobility increase stock market volatility and illiquidity. • Negative sentiments from Coronavirus related news deteriorate stock market liquidity and stability. This study investigates the impact of COVID-19 pandemic on the microstructure of US equity markets. In particular, we explain the liquidity and volatility dynamics via indexes that capture multiple dimensions of the pandemic. Our results suggest that increases in confirmed cases and deaths due to coronavirus are associated with a significant increase in market illiquidity and volatility. Similarly, declining sentiment and the implementations of restrictions and lockdowns contribute to the deterioration of liquidity and stability of markets. [ABSTRACT FROM AUTHOR]

• I propose a new methodology to identify the most liquid Bitcoin exchange at each point in time, taking into account that reported trading volume might be inflated. • Liquidity of Bitcoin has improved substantially in recent years. • Liquidity is determined mostly from within the Bitcoin network, not from the US economy. • The volatility of gold is linked to Bitcoin quote imbalances. • Trading and market making patterns are consistent with both institutional and retail investors' activities. This paper analyzes the evolution of Bitcoin liquidity and its determinants. Using a new methodology to identify the most liquid exchange at each point in time, I find that driving factors behind the overall increases in liquidity and trading activity come mostly from within the Bitcoin network. While the state of the US economy only weakly influences Bitcoin liquidity, there is some evidence that gold and Bitcoin are perceived as complements. Moreover, patterns in market making and trading are consistent with the activity of both institutional and retail traders. [ABSTRACT FROM AUTHOR]

• A firm-specific sentiment index is developed. • There is a significant positive relationship between firm-specific investor sentiment and stock price crash risk. • The positive relationship is robust to different measures of crash risk, the inclusion of some omitted variables and the winsorization of some variables. • The positive relationship is more pronounced for firms with worse liquidity. This study investigates the impact of firm-specific investor sentiment on stock price crash risk. To achieve this goal, we first develop a firm-specific investor sentiment index. Based on the sentiment index, we conduct empirical tests and find that there is a significant positive relationship between firm-specific investor sentiment and stock price crash risk. This finding holds after a series of robustness checks including different measures of crash risk, the winsorization of some variables, and the inclusion of some omitted variables. Further analyses show that the positive relationship is more pronounced for firms with worse liquidity. [ABSTRACT FROM AUTHOR]

• It is the first work which focuses on three indicators of the financial market, namely volatility expectations, correlation expectations and illiquidity during the COVID-19 crisis. • We examine structural breaks in the stock market returns – implied volatility, stock market returns –implied correlation and stock market returns – market illiquidity relations. • We detect a structural break in the relationship between stock returns – correlation expectations preceding by one day the structural break in stock returns – volatility expectations. • Italy is recognized as the only one country transmitting fears from the data of COVID-19 cases to global fear gauges related to volatility and correlation. • Stock market illiquidity does not affect the stock market returns and does not depend on any COVID-19 official announcements of cases and deaths. This paper investigates the relationship between US stock market returns (S&P500) and three indicators of the market, namely implied volatility, implied correlation and liquidity. It also considers the short range dependence between both total confirmed cases and deaths in twelve countries and market movements. We use the two-regime Markov switching model to find the structural break between stock market returns and key stock market indicators. The findings show close dependence between returns and both implied volatility and implied correlation but not with liquidity. The findings indicate the unique role of Italy in crisis transmission. [ABSTRACT FROM AUTHOR]

• This article is to show that microstructure liquidity measures are relevant for macroeconomic analysis. We show that the state of the macroeconomic uncertainty affects stock market liquidity. • This paper also enhances our understanding of the mechanism by which asset markets are linked to the macroeconomy. We find evidence that time variation in equity market liquidity is related to change in market competition over information, especially for the relation between macroeconomic uncertainty and market competition over information. • This paper examine stocks with good and bad uncertainty elasticity of liquidity (UEL) are associated with different firm characteristics. In this study we provide evidence regarding the effect of macroeconomic uncertainty on stock market liquidity by analyzing the time-series relation between both types of macroeconomic uncertainty shocks: good and bad uncertainty and various measures of liquidity. Our study also sheds light on whether the impact of macroeconomic uncertainty on liquidity varies with information environment by examining the effects of investor competition over information on the relation between good and bad uncertainty and liquidity in the Taiwan markets. We find that there is a negative (positive) relation between bad (good) uncertainty and the subsequent liquidity of stocks. We also find that the magnitude of the impact of bad uncertainty on stock market liquidity is larger than good uncertainty. On the other side, macroeconomic uncertainty would exerts a larger impact on liquidity when the market is imperfectly competitive. [ABSTRACT FROM AUTHOR]

• We look at the capital-liquidity-lending relationship in European banks. • The effect of bank capital on lending depends on the level of bank liquidity. • Capital exerts a positive effect on lending after banks retain sufficient liquid funds. • The results are robust to different measures of lending, capital and liquidity. • Capital and liquidity are complementary for European banks. • Policy actions to strengthen capital and liquidity should be considered together. We examine whether the effect of bank capital on credit growth differs depending upon the level of liquidity in a panel of up to 521 banks from 21 European countries. We find that the effect of an increase in bank capital is positively associated with the level of bank liquidity, suggesting that capital exerts a significantly positive effect on European banks' credit growth after they retain sufficient liquid funds. [ABSTRACT FROM AUTHOR]

• Strong legal system and investor rights reduce earnings management of ADR firms. • More institutional shareholders and analysts reduce earnings management of ADR firms. • Higher stock liquidity reduces earnings management of ADR firms. • ADR firms are less likely to manage earnings in the post-listing period. • ADR firms listed in major exchanges are less likely to manage earnings. This study examines the impact of investor protection, market monitoring, and stock liquidity on the degree of earnings management using a sample of 430 firms from 34 countries cross-listed as American Depository Receipts (ADRs). Our primary findings are that ADR firms from countries with strong legal system, strong outside investor rights, more institutional shareholders, and more financial analysts following are less likely to engage in earnings management. Auditor quality is not a significant factor. Further, firms with low stock liquidity tend to manipulate earnings relative to those with high liquidity. Legal factors, institutional holdings, and stock liquidity are particularly significant factors, suggesting that threats of lawsuits and monitoring by investors are effective mechanism to reduce earnings manipulation. Results also indicate that cross-listed firms exercise more earnings management in the pre-listing period than in the post-listing period and that stocks listed in the OTC market tend to have more earnings management than those in major exchanges. [ABSTRACT FROM AUTHOR]

While it is not clear from Christensen, Hail, and Leuz (2016), the market abuse rules they examine are the same as in Cumming, Johan, and Li (2011), with a difference in focus on the date: Christensen et al. (2016) pick the date the regulations were signed into law, while Cumming et al. (2011) pick date the date the regulations were implemented with organizational agreements and computerized surveillance. Both papers study and find the exact same effect: regulatory change improves market liquidity. We explain the relative merits of the different approaches in this paper, and identify misleading statements in prior work. [ABSTRACT FROM AUTHOR]