Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.finmar.2012.09.007
Title: Stock price synchronicity and liquidity
Authors: Chan, K.
Hameed, A. 
Kang, W.
Keywords: Liquidity
Price synchronicity
Systematic volatility
Issue Date: Aug-2013
Citation: Chan, K., Hameed, A., Kang, W. (2013-08). Stock price synchronicity and liquidity. Journal of Financial Markets 16 (3) : 414-438. ScholarBank@NUS Repository. https://doi.org/10.1016/j.finmar.2012.09.007
Abstract: We argue and provide evidence that stock price synchronicity affects stock liquidity. Under the relative synchronicity hypothesis, higher return co-movement (i.e., higher systematic volatility relative to total volatility) improves liquidity. Under the absolute synchronicity hypothesis, stocks with higher systematic volatility or beta are more liquid. Our results support both hypotheses. We find all three illiquidity measures (effective proportional bid-ask spread, price impact measure, and Amihud's illiquidity measure) are negatively related to stock return co-movement and systematic volatility. Our analysis also shows that larger industry-wide component in returns improves liquidity. We find that improvement in liquidity following additions to the S&P 500 Index is related to the stock's increase in return co-movement. © 2013.
Source Title: Journal of Financial Markets
URI: http://scholarbank.nus.edu.sg/handle/10635/114885
ISSN: 13864181
DOI: 10.1016/j.finmar.2012.09.007
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