Tick Size and Commonality in Liquidity

A Theory of Demand Driven Liquidity Commonality

Examining the Commonality in Liquidity and Volatility Risk

We estimate latent factor models of liquidity and volatility. Common liquidity and volatility factors are extracted using multiple liquidity and volatility measures. Additionally, latent factors are extracted by aggregating across both liquidity and volatility resulting in what we will call the common “uncertainty” factors. We find that volatility and the common uncertainty risk are significant...

Liquidity and volatility commonality in the Canadian Stock Market

This paper studies liquidity and volatility commonality in the Canadian stock market. We show that five various liquidity measures display strong evidence of commonality at both market-wide and industry specific levels. Our findings extend the results of previous studies in liquidity commonality, and show that even after controlling for individual determinants of liquidity such as price, volume...

Commonality in Liquidity in Pure Order-Driven Markets∗

This paper extends previous research on commonality in liquidity to pure limit order markets. Using data over three months on the order book of 19 stocks traded at the Swiss Stock Exchange (SWX), we perform a principals components analysis and find evidence of the existence of three to four common factors. The fraction of the variation in liquidity explained by these common factors is higher th...

The Role of Algorithmic Trading in Stock Liquidity and Commonality in Electronic Limit Order Markets

In investigating the effects of algorithmic trading on stock market liquidity and commonality in liquidity in different market conditions in an electronic limit order market, we find algorithmic trading increases stock liquidity by narrowing quoted and effective bid–ask spreads. Furthermore, algorithmic trading decreases commonality in liquidity; this finding is robust across a variety of liqui...