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Emerging market liquidity and crises (Inglês)

Whereas conventional wisdom argues that markets shut down during crises, with sellers struggling to find buyers, we find that markets continue to operate during financial turmoil, even in narrow and volatile emerging economies. Simple event studies indicate that both trading volume and trading costs increase in crisis times. Prices change more with each dollar transacted (pushing the Amihud illiquidity measure up) and bid-ask spreads widen. More generally, econometric estimates show that large price downturns, typical of crises, are associated with higher trading activity and increased trading costs, with trading activity declining only later as crises progress. Thus, while trading activity tends to be negatively related to trading costs during tranquil times (and across securities), this relation appears to break down during crises. These results are consistent with the analytical literature on portfolio rebalancing by heterogeneous agents in times of crises.

Detalhes

  • Autor

    Schmukler,Sergio L., Van Horen,Neeltje, Levy-Yeyati,Eduardo

  • Data do documento

    2007/12/01

  • TIpo de documento

    Documento de trabalho sobre pesquisa de políticas

  • No. do relatório

    WPS4445

  • Nº do volume

    1

  • Total Volume(s)

    1

  • País

    Mundo,

  • Região

    Regiões Mundiais,

  • Data de divulgação

    2010/07/01

  • Disclosure Status

    Disclosed

  • Nome do documento

    Emerging market liquidity and crises

  • Palavras-chave

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