Evaporating Liquidity

• 成果类型: Article
• 署名作者: Nagel, Stefan
• 署名单位: Stanford University; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs066
• 发表日期: 2012
• 页码: 2005
• 关键词: MARKET-MAKER INVENTORIES; STOCK; COSTS; illiquidity; RISK

摘要

The returns of short-term reversal strategies in equity markets can be interpreted as a proxy for the returns from liquidity provision. Using this approach, this article shows that the return from liquidity provision is highly predictable with the VIX index. Expected returns and conditional Sharpe ratios from liquidity provision spike during periods of financial market turmoil. The results point to withdrawal of liquidity supply and an associated increase in the expected returns from liquidity provision, as a main driver behind the evaporation of liquidity during times of financial market turmoil, consistent with theories of liquidity provision by financially constrained intermediaries.