Liquidity and Market Crashes

• 成果类型: Article
• 署名作者: Huang, Jennifer; Wang, Jiang
• 署名单位: University of Texas System; University of Texas Austin; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhn086
• 发表日期: 2009
• 页码: 2607
• 关键词: expected stock returns; trading volume; Price volatility; asset prices; OCTOBER 1987; equilibrium; MODEL; PARTICIPATION; transactions; BEHAVIOR

摘要

In this paper, we develop an equilibrium model for stock market liquidity and its impact on asset prices when constant market presence is costly. We show that even when agents' trading needs are perfectly matched, costly market presence prevents them from synchronizing their trades and hence gives rise to endogenous order imbalances and the need for liquidity. Moreover, the endogenous liquidity need, when it occurs, is characterized by excessive selling of significant magnitudes. Such liquidity-driven selling leads to market crashes in the absence of any aggregate shocks. Finally, we show that illiquidity in the market leads to high expected returns, negative and asymmetric return serial correlation, and a positive relation between trading volume and future returns. We also propose new measures of liquidity based on its asymmetric impact on prices and demonstrate a negative relation between these measures and expected stock returns. (JEL D53, G12)