Journal of Financial Economics 56 (2000) 3}28
Commonality in liquidity
Tarun Chordia , Richard Roll *,
Avanidhar Subrahmanyam
Owen School of Management, Vanderbilt University, Nashville, TN 37203, USA
The Anderson School, University of California Los...
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Journal of Financial Economics 56 (2000) 3}28
Commonality in liquidity
Tarun Chordia , Richard Roll *,
Avanidhar Subrahmanyam
Owen School of Management, Vanderbilt University, Nashville, TN 37203, USA
The Anderson School, University of California Los Angeles, Los Angeles, CA 90095-1481, USA
Received 8 August 1998; received in revised form 27 May 1999
Abstract
Traditionally and understandably, the microscope of market microstructure has
focused on attributes of single assets.
Little theoretical attention and virtually no
empirical work has been devoted to common determinants of liquidity nor to their
empirical manifestation, correlated movements in liquidity.
But a wider-angle lens
exposes an imposing image of commonality.
Quoted spreads, quoted depth, and e!ective
spreads co-move with market- and industry-wide liquidity.
After controlling for wellknown individual liquidity determinants, such as volatility, volume, and price, common
in#uences remain signi"cant and material.
Recogni
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