Liquidity Black HolesAvinash Persaud The Gresham and Mercer Memorial Professor of Commerce Managing Director & Head of Research State Street Global Markets April 2002... What is liquidit
Trang 1Liquidity Black Holes
Avinash Persaud The Gresham and Mercer Memorial Professor of Commerce
Managing Director & Head of Research
State Street Global Markets
April 2002
Trang 2What is liquidity and why does it
matter?
• Recorded spreads are a poor measure
Trang 3Price impact of trading
-0.2
0.0
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1.0
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Emerging Market Sells
Emerging Market Buys
% return per basis point of market
liquidity
number
this matters
Trang 4Liquidity Black Holes
0 10 20 30 40 50 60
5 year smoothed average Number of days
Liquidity black holes: number of days per quarter that the
US, Japanese and UK broad stock indices have moved by 2 standard deviations more than the average daily price move
which liquidity disappears
and then returns
becoming more frequent
bigger and yet thinner
Trang 5Liquidity needs diversity
Trang 6Liquidity needs losers
Trang 7Avoiding liquidity black holes
to the previous
Trang 8trends