Illiquidity Contagion and Liquidity Crashes

• 成果类型: Article
• 署名作者: Cespa, Giovanni; Foucault, Thierry
• 署名单位: City St Georges, University of London; Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu016
• 发表日期: 2014
• 页码: 1615
• 关键词: BOND MARKET LIQUIDITY; Financial contagion; empirical-analysis; stock markets; COMMONALITY; INFORMATION; arbitrage; microstructure; equilibrium; returns

摘要

Liquidity providers often learn information about an asset from prices of other assets. We show that this generates a self-reinforcing positive relationship between price informativeness and liquidity. This relationship causes liquidity spillovers and is a source of fragility: a small drop in the liquidity of one asset can, through a feedback loop, result in a very large drop in market liquidity and price informativeness (a liquidity crash). This feedback loop provides a new explanation for comovements in liquidity and liquidity dry-ups. It also generates multiple equilibria.