Electricity Blackout and Its Ripple Effects: Examining Liquidity and Information Asymmetry in U.S. Financial Markets

Abstract

The massive blackout that occurred in August 2003 left over 50 million people in the northeastern and midwestern parts of the United States without electricity and caused billions of dollars in economic losses. This event highlighted the importance of sustainable and resilient energy infrastructure. Our study examines the impact of this blackout on the sustainability of financial markets by analyzing the liquidity and information asymmetry of U.S. stocks listed on major exchanges. Our results show that the blackout had a negative impact on the financial market’s liquidity, as evidenced by a significant widening of bid–ask spreads and a decrease in the market quality index. We also find an increase in information asymmetry during the blackout period, as measured by higher realized spreads. Furthermore, our study reveals that the blackout had a border impact on global financial markets and the negative effect on liquidity persisted even after two weeks.

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Corporate Social Responsibility Disclosure and Stock Market Liquidity: The Case of Jordan

“…SPREAD represents the proportional spread observed throughout the year 2018, while CSR_O denotes the firm's overall CSR. Computing 'SPREAD' involves taking the average of daily bid and ask prices and then dividing the difference between the ask and bid prices by the average of the bid and ask prices [40,53] It is crucial to acknowledge that bid-ask spreads primarily serve as a proxy for market liquidity, not direct indicators of information asymmetry (e.g., [53]). As a result, bid-ask spreads only partially encompass such information asymmetries.…”

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