Common market makers and commonality in liquidity

Liquidity Commonality Beyond Best Prices

“…The empirical evidence on this issue is ambiguous. For the US market, Coughenour and Saad (2004) find that in falling markets specialist behavior tends to be more strongly correlated across the stocks that they manage than in rising markets, while Domowitz, Hansch and Wang (2005) observe no systematic differences for the Australian market.…”

The world price of liquidity risk

“…• β 2,D i is a liquidity risk arising from the comovement of individual stock liquidity with market liquidity (Chordia, Roll, and Subrahmanyam (2000), Hasbrouck and Seppi (2001), Huberman and Halka (2001), Coughenour and Saad (2004)). 3 β 2,D i is expected to be positively related to asset returns since investors require compensation for a stock whose liquidity decreases when the market liquidity goes down.…”

Liquidity commonality under normal and a boom/bust conditions: Evidence from the Saudi stock exchange

“…According to Fernando et al (2008), commonalities in liquidity shocks affect investors' beliefs about market trends, and lead to a drop in the market. Coughenour and Saad (2004) affirmed that the existence of a liquidity commonality could help researchers to understand the dynamics of liquidity, while helping regulators and other participants to improve the market design.…”

“…Several empirical studies have proposed fundamental sources of liquidity commonalities. The first group of studies suggest supply-side sources, for example, the fundingliquidity mechanism (Coughenour and Saad 2004;Brunnermeier and Pedersen, 2008;Hameed et al, 2010;Rösch and Kaserer, 2014;Lee et al, 2014); covariations in stock volatility and co-variations in inventory risk (Bai and Qin, 2015). The second group explore demand-side sources, for example, the liquidity demand of stocks' investors (Koch et al, 2016); the level of institutional ownership and individual investors (Kamara et al, 2008); institutional ownership and investor sentiment trading by investors (Karolyi et al, 2012;Lee et al, 2014); trading activity (Chordia et al, 2000;Hasbrouck and Seppi, 2001).…”