Contagious Margin Calls: How COVID-19 Threatened Global Stock Market Liquidity
| Autor: | Bernt Arne Ødegaard, Richard Philip, Amy Kwan, Sean Foley |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Margin requirements
Economics and Econometrics History Capital constraint Polymers and Plastics Coronavirus disease 2019 (COVID-19) COVID-19 Monetary economics Article Industrial and Manufacturing Engineering Market maker Market liquidity Coronavirus Margin (finance) Pandemic Threatened species Stock market liquidity liquidity spiral Stock market Business Business and International Management Finance health care economics and organizations |
| Zdroj: | Journal of Financial Markets |
| Popis: | The COVID-19 epidemic has caused some of the largest - and fastest - market dislocations in modern history. Contemporaneous with the significant fall in equity market values is the evaporation of market liquidity. We document the evolution of transactions costs, depth and rewards to liquidity suppliers across a variety of countries affected by the virus. We show that transactions costs increase sharply in a coordinated fashion across global markets, with depth drying up almost overnight. The withdrawal of global liquidity suppliers is correlated with the increase of over 400% in margin requirements, driving a pro-cyclical downwards liquidity spiral. These affects are shown to be concentrated in securities most exposed to electronic market-makers. |
| Databáze: | OpenAIRE |
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