Price leadership in China's oil futures market: take two

This study is the first to conduct a comprehensive analysis of the price discovery and market liquidity aspects of China's crude oil futures market compared to WTI and Brent. With intraday-day data consolidated into 1-second intervals and three measures of price discovery, we find that China's crude oil futures market reports encouraging signs in terms of price discovery and efficiency, also showing great resilience during the COVID-19 pandemic. The market has obtained a dominant role in price discovery relative to WTI and Brent during its day trading hours, and has almost caught up with Brent in terms of market liquidity. © 2023 Informa UK Limited, trading as Taylor & Francis Group.

The time-varying effects of liquidity and market efficiency of the European Union carbon market: Evidence from the TVP-SVAR-SV approach

We use the time-varying parameter structural vector autoregression stochastic volatility (TVP-SVAR-SV) and causality-in-quantiles methods to explore the linkage between market liquidity and efficiency in the European Union Emissions Trading Scheme (EU ETS) during Phase III. Our results show that two-way causality existed under normal and lower market conditions. Additionally, the linkage between liquidity and efficiency exhibits time-varying characteristics. Except in cases of extremely high market liquidity, the pass-through effect of liquidity on efficiency is mostly positive in the long run. The linkage is stronger in the medium and long term, but the response of liquidity to efficiency shocks is more complicated. Market efficiency has an overall inhibitory effect on liquidity in the short term and a promoting effect in the medium and long term. Furthermore, we investigate the impulse response during the COVID-19 period and the war between Russia and Ukraine and find that improvements in efficiency will permanently damage liquidity. Overall, the abilities of market makers and arbitrage traders, impacted by multiple factors, play an important role in the process by which liquidity affects market efficiency. By revealing and explaining the dynamic relationship between liquidity and efficiency, this research provides valuable information for policymakers and various market participants.

Dividend policy, its asymmetric behavior and stock liquidity

Purpose: This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity. Design/methodology/approach: A multivariate panel-data regression analysis is conducted for a sample of the largest 411 nonfinancial US firms. Three main hypothesis are tested: (1) whether dividend payouts impact affect stock liquidity, (2) whether low and high dividend payments can asymmetrically effect on stock liquidity and (3) whether the presence of the GFC has an impact the relationship between dividend payments and stock liquidity. Findings: The study finds that dividend policy is adversely associated with stock liquidity. This supports the prediction of the liquidity-dividend hypothesis. The authors also report that stock liquidity asymmetrically responds to changes in dividend payouts, confirming the prediction of the dividend-signaling approach. More specifically, higher dividend payments decrease stock liquidity by a lower magnitude than the increase in stock liquidity resulting from lower dividend payments. Finally, the presence of the GFC weakened the relationship between dividend payments and stock liquidity. Research limitations/implications: The paper can help in performing future research by using different dataset covering the COVID-19 crisis. Practical implications: The paper allows market participants to better understand the impact of dividend policy and its asymmetric effects on stock liquidity. The authors' analyses can direct investors and regulators to adopt new supervisory devices to create an appropriate level of dividend payouts that helps to effectively support the level of stock liquidity. Social implications: The paper intends to support the business community and to make strong contributions to the economic development and the welfare of the community. Originality/value: The originality comes from its new evidence as it can help in assessing the importance of dividend policy and its asymmetric impact on stock liquidity in the full sample and during the GFC. The paper is helpful in performing future analyses using a new sample period for another set of data as well as accounting for COVID-19 pandemic crisis. [ FROM AUTHOR] Copyright of Journal of Economic Studies is the property of Emerald Publishing Limited and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Can EU Bonds Serve as Euro-Denominated Safe Assets?

A safe asset is of high credit quality, retains its value in difficult times, and is traded in liquid markets. We show that bonds issued by the European Union (EU) are widely considered to be of high credit quality, and that their yield spread over German Bunds remained contained during the 2020 COVID-19 pandemic recession. Recent issuances and taps under the EU's SURE and NGEU initiatives helped improve EU bonds' market liquidity from previously low levels, while also reducing liquidity risk premia. Eurosystem purchases and holdings of EU bonds did not impair market liquidity. Currently, an obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU's COVID-19-related policy responses. © 2022 by the authors.

Effects of market liquidity on price dynamics in a heterogeneous belief model

To understand the effect of liquidity on asset pricing, this study constructs a boundedly rational asset pricing model, introducing market liquidity and heterogeneous beliefs. Based on our model, we conduct empirical tests using the S&P 500 index from 1991 to 2021 and the CSI 500 index from 2007 to 2021. We find that market liquidity significantly influences investors' expectations and belief switching. When market liquidity is scarce, fundamentalists in both markets expect the price to converge more quickly to its fundamental value, whereas chartists perceive that the price deviates from its fundamental value less rapidly. Lack of liquidity mitigates the investors' original switching strategy, resulting in positive feedback as a net effect. Moreover, the S&P 500 index is efficient, whereas the CSI 500 index is slightly undervalued in the long run. Both markets exhibit large fluctuations and inefficiency during short periods such as the 2008 financial crisis and COVID-19 pandemic. As such, safeguards should be implemented against sudden shocks and the resulting price deviation and market inefficiency.

Impact of government policy responses of COVID-19 pandemic on stock market liquidity for Australian companies.

This study investigates the impact of government policy responses of COVID-19 pandemic on stock market liquidity for listed Australian companies and for 11 different industries separately. A quantitative deductive approach is used for a sample of 1,452 companies with a total of 292,164 firm-day observations over a period from January 25, 2020 to December 31, 2020 during the outbreak of COVID-19. Univariate and multivariate (two-way cluster-robust panel regression) analysis were conducted. Data were collected from the Oxford COVID-19 Government Response Tracker, Worldmeter, Refinitiv Workspace and Datastream. Our findings indicate that the influences of the six out of seven stringency policy responses reduced Australian equity market liquidity. However, public information campaigns enhanced market liquidity and hence trading activity. Among the 11 industries, our analysis shows that the non-pharmaceutical interventions by the Australian government have significant and positive effects on four industries: Consumer non-cyclicals, healthcare, financial and technology. However, the worse effects were depicted in the industrial (transportation) and energy industries. This study is important for investors, policymakers and regulators to understand the diverse effects of government policy responses of COVID-19 on stock market liquidity to enhance financial stability. Moreover, understanding this effect is particularly important to decision-makers such as portfolio and fund managers to manage their portfolios and trading activities during extreme turbulence times, such as COVID-19. Unlike previous studies that focus on country analysis, this study examines on firm basis the impact of government interventions on stock market liquidity in a well developed Australian stock market.

Local Housing Market Sentiments and Returns: Evidence from China

This paper examines the impacts of local housing sentiments on the housing price dynamics of China. With a massive second-hand transaction dataset, we construct monthly local housing sentiment indices for 18 major cities in China from January 2016 to October 2020. We create three sentiment proxies representing the local housing market liquidity and speculative behaviors from the transaction dataset and then use partial least squares (PLS) to extract a recursive look-ahead-bias-free local housing sentiment index for each city considered. The local housing sentiments are shown to have robust predictive powers for future housing returns with a salient short-run underreaction and long-run overreaction pattern. Further analysis shows that local housing sentiment impacts are asymmetric, and housing returns in cities with relatively inelastic housing supply are more sensitive to local housing sentiments. We also document a significant feedback effect between housing returns and market sentiments, indicating the existence of a pricing-sentiment spiral which could potentially enhance the ongoing market fever of Chinese housing markets. The main estimation results are robust to alternative sentiment extraction methods and alternative sentiment proxies, and consistent for the sample period before COVID-19.

Stock Market Liquidity during Periods of Distress and its Implications: Evidence from International Financial Markets

Traditional market pricing models assume frictionless markets with abundant liquidity. This traditional models also incorporate stock market liquidity as an exogenous cost. However, this paradigm has many shortcomings due to its inability to explain some of the problems associated with security market illiquidity. The aim of this study was to explore the concept of stock market liquidity during periods of financial distress. A Markov switching GARCH model was used to investigate market liquidity in the CAC 40, DAX, JSE, Nasdaq Index and the Nikkei-225 during the 2007-2008 financial crisis and the Covid-19 pandemic. The sample period was January 1, 2020 to December 31, 2021 and December 1, 2007 to June 30, 2009. From the findings, some financial markets where still liquid despite the financial crisis with the exception of the Nasdaq index. Conversely, all the financial markets under consideration displayed strong illiquidity during the covid-19 pandemic. In essence, the level of market depth has significantly decreased from the financial crisis to the covid-19 pandemic which may be attributed to increasing margin requirements and information asymmetry as well as price restrictions. There is an urgent need for regulatory authorities to review some of the trading regulations during financial distress.

Leadership in a pandemic: Do more able managers keep firms out of trouble?

The Coronavirus crisis has led to unprecedented economic shocks to the corporate world and challenged how corporate management contributes to business resilience amid the pandemic. Employing a novel measure of managerial ability constructed for a large sample of U.S. publicly listed firms, we document that firms led by higher managerial ability exhibit lower stock return volatility, higher operating performance, and lower levels of default risk amid the pandemic. A difference-in-differences analysis suggests that the impact of managerial ability on firm performance is stronger during the pandemic than during the pre-pandemic period. The effect of managerial competency on corporate resiliency is more pronounced among firms that have high exposure to COVID-19. In addition, firms led by high managerial competency management are associated with higher stock liquidity and are less likely to exhibit employment, healthcare, safety, and consumer protection related violations amid the pandemic.

Effects of market liquidity on price dynamics in a heterogeneous belief model

To understand the effect of liquidity on asset pricing, this study constructs a boundedly rational asset pricing model, introducing market liquidity and heterogeneous beliefs. Based on our model, we conduct empirical tests using the S&P 500 index from 1991 to 2021 and the CSI 500 index from 2007 to 2021. We find that market liquidity significantly influences investors’ expectations and belief switching. When market liquidity is scarce, fundamentalists in both markets expect the price to converge more quickly to its fundamental value, whereas chartists perceive that the price deviates from its fundamental value less rapidly. Lack of liquidity mitigates the investors’ original switching strategy, resulting in positive feedback as a net effect. Moreover, the S&P 500 index is efficient, whereas the CSI 500 index is slightly undervalued in the long run. Both markets exhibit large fluctuations and inefficiency during short periods such as the 2008 financial crisis and COVID-19 pandemic. As such, safeguards should be implemented against sudden shocks and the resulting price deviation and market inefficiency. © 2022 Informa UK Limited, trading as Taylor & Francis Group.

COVID-19 catastrophes and stock market liquidity: evidence from technology industry of four biggest ASEAN capital market

Purpose: This study examines the influence of various COVID-19 catastrophes variables on the stock market liquidity, considering the market depth and market tightness in the technology industry of the four biggest ASEAN capital markets. Design/methodology/approach: The study utilised the panel data regression analysis obtained from 177 listed technology companies across the four ASEAN countries from March 2, 2020 to June 30, 2021 using the random effect and weighted least squares. The study also supported the result with robustness test, implementing the quantile regression to further present companies' segmentation within the variables. Findings: The regression results indicate that daily growth COVID-19 confirmed cases and stringency that adversely impacted the stock market liquidity. Confirmed deaths were also found to have a detrimental effect on the stock market liquidity. On the other hand, recoveries and vaccination of COVID-19 enhance the stock market liquidity to escalate. Research limitations/implications: The study affirms that stock market liquidity is bound to be driven by the COVID-19 variables, but only to be limited to the technology industry observed in four major ASEAN capital markets. Awareness by investors and government could be shifted towards the rise of confirmed cases, recoveries, vaccination and stringency as it improves the liquidity of capital market in aggregate. However, rise of confirmed deaths negatively affect the liquidity. All in all, government and stock market regulator should promote transparency to boost investors' confidence in trading. Originality/value: This study initiates the investigation in the four biggest ASEAN capital markets, particularly in the technology industry, regarding the COVID-19 catastrophes and stock market liquidity in terms of both market depth and market tightness. Further, this study enriches the impact of COVID-19 by taking the recovery cases and vaccination of COVID-19 as additional consideration. © 2022, Emerald Publishing Limited.

Dividend policy, its asymmetric behavior and stock liquidity

Purpose: This paper examines the impact of dividend policy on stock market liquidity, and whether the dividend payouts has an asymmetric effect on stock liquidity. Design/methodology/approach: A multivariate panel-data regression analysis is conducted for a sample of the largest 411 nonfinancial US firms. Three main hypothesis are tested: (1) whether dividend payouts impact affect stock liquidity, (2) whether low and high dividend payments can asymmetrically effect on stock liquidity and (3) whether the presence of the GFC has an impact the relationship between dividend payments and stock liquidity. Findings: The study finds that dividend policy is adversely associated with stock liquidity. This supports the prediction of the liquidity-dividend hypothesis. The authors also report that stock liquidity asymmetrically responds to changes in dividend payouts, confirming the prediction of the dividend-signaling approach. More specifically, higher dividend payments decrease stock liquidity by a lower magnitude than the increase in stock liquidity resulting from lower dividend payments. Finally, the presence of the GFC weakened the relationship between dividend payments and stock liquidity. Research limitations/implications: The paper can help in performing future research by using different dataset covering the COVID-19 crisis. Practical implications: The paper allows market participants to better understand the impact of dividend policy and its asymmetric effects on stock liquidity. The authors’ analyses can direct investors and regulators to adopt new supervisory devices to create an appropriate level of dividend payouts that helps to effectively support the level of stock liquidity. Social implications: The paper intends to support the business community and to make strong contributions to the economic development and the welfare of the community. Originality/value: The originality comes from its new evidence as it can help in assessing the importance of dividend policy and its asymmetric impact on stock liquidity in the full sample and during the GFC. The paper is helpful in performing future analyses using a new sample period for another set of data as well as accounting for COVID-19 pandemic crisis. © 2022, Emerald Publishing Limited.

SHIBOR Fluctuations and Stock Market Liquidity: An MF-DCCA Approach

This paper examines the nonlinear and dynamic cross-correlations between SHIBOR and Chinese stock market liquidity by employing MF-DCCA method. The cross-correlations display weak persistence and multifractal characteristics, explaining the variations in the relationship between them. The multifractality strength of the cross-correlations decreases after a recent liberalization reform. Moreover, interest rates have a significantly strong influence on stock market liquidity during tight monetary policy and emergencies, indicating the asymmetric and time-varying impact of interest rates on stock market liquidity. In addition, the effectiveness of interest rate transmission decreases in the period of the COVID-19 pandemic.

COVID-19, government policy responses, and stock market liquidity around the world: A note.

Unprecedented non-pharmaceutical interventions targeted to curb the spread of COVID-19 exerted a dramatic impact on the global economy and financial markets. This study is the first attempt to investigate the influence of these government policy responses on global stock market liquidity. To this end, we examine daily data from 49 countries for the period January-April 2020. We demonstrate that the impact of the interventions is limited in scale and scope. Workplace and school closures deteriorate liquidity in emerging markets, while information campaigns on the novel coronavirus facilitate trading activity.