Grass-Root stock market investment and long-term commonality in liquidity

Abstract

This chapter measures stock market liquidity with three low-frequency liquidity estimators, and investigates the long-term behaviour of commonality in liquidity on the Shanghai Stock Exchange (SSE) through principal component analyses and panel regressions. The findings provide strong evidence of liquidity co-movement on the SSE from its inception to the present. The extent of commonality in liquidity varies significantly over time. Remarkably, it surged in 2007, which corresponds to the onset of the subprime mortgage-triggered financial crisis; however, the subsequent behaviour is divergent among our different liquidity proxies.

Citation

Beaupain, R., Meng, L. and Marticou, M. (2011), "Grass-Root stock market investment and long-term commonality in liquidity", Batten, J.A. and Szilagyi, P.G. (Ed.) The Impact of the Global Financial Crisis on Emerging Financial Markets (Contemporary Studies in Economic and Financial Analysis, Vol. 93), Emerald Group Publishing Limited, Leeds, pp. 625-643. https://doi.org/10.1108/S1569-3759(2011)0000093023