Some hypotheses on commonality in liquidity: new evidence from the Chinese stock market

Narayan, Paresh Kumar, Zhang, Zhichao and Zheng, Xinwei 2015, Some hypotheses on commonality in liquidity: new evidence from the Chinese stock market, Emerging markets finance and trade, vol. 51, no. 5, pp. 915-944, doi: 10.1080/1540496X.2015.1061799.

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Title Some hypotheses on commonality in liquidity: new evidence from the Chinese stock market
Author(s) Narayan, Paresh KumarORCID iD for Narayan, Paresh Kumar
Zhang, Zhichao
Zheng, XinweiORCID iD for Zheng, Xinwei
Journal name Emerging markets finance and trade
Volume number 51
Issue number 5
Start page 915
End page 944
Total pages 30
Publisher Routledge
Place of publication Oxford, Eng.
Publication date 2015-09-03
ISSN 1540-496X
Keyword(s) asymmetric information
Chinese stock exchange
commonality in liquidity
size effects
Summary In this article, we examine four specific hypotheses relating to commonality in liquidity on the Chinese stock markets. These hypotheses are (1) that market-wide liquidity determines liquidity of individual stocks; (2) that liquidity varies with firm size; (3) that sectoral-based liquidity affects individual stock liquidities differently; and (4) that commonality in liquidity has an asymmetric effect. Drawing on a two-year data set on the Shanghai and Shenzhen stock exchanges comprising over 34 million and 48 million transactions, respectively, we find strong support for commonality in liquidity and a greater influence of industry-wide liquidity in explaining liquidity of individual stocks. Moreover, our results suggest that of the three main sectors - financial, industrial, and resources - the industrial sectors liquidity is most important in explaining individual stock liquidities. Finally, we do not find any evidence of size effects and document an asymmetric effect of market-wide liquidity on liquidity of individual stocks.
Language eng
DOI 10.1080/1540496X.2015.1061799
Field of Research 150202 Financial Econometrics
Socio Economic Objective 910109 Savings and Investments
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Taylor & Francis
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Collections: Faculty of Business and Law
Deakin Business School
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