Emerging Market Liquidity and Crises
Whereas conventional wisdom argues that markets shut down during crises, with sellers struggling to find buyers, we find that markets continue to operate during financial turmoil, even in narrow and volatile emerging economies. Simple event studies...
| Main Authors: | , , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/12/8881183/emerging-market-liquidity-crises http://hdl.handle.net/10986/7549 |
| id |
okr-10986-7549 |
|---|---|
| recordtype |
oai_dc |
| spelling |
okr-10986-75492021-04-23T14:02:35Z Emerging Market Liquidity and Crises Levy Yeyati, Eduardo Schmukler, Sergio L. Van Horen, Neeltje ASSET MARKETS ASSET PRICES ASYMMETRIC INFORMATION AVERAGE PRICE BID BOND BOND MARKET BOND SPREAD BUSINESS SCHOOL BUYERS CAPITAL OUTFLOWS CENTRAL BANK COLLATERAL COMMERCIAL BANK COMMON STOCK DEFAULT PROBABILITIES DEMAND CURVE DEPOSITS DOLLAR VALUE ECONOMETRICS EFFICIENT MARKET EMERGING ECONOMIES EMERGING MARKET EMERGING MARKETS EQUITY MARKETS EXCHANGE RATE EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DISTRESS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL RESEARCH FINANCIAL STUDIES FINANCIAL SYSTEM FUTURE RESEARCH GLOBAL FINANCIAL SYSTEM ILLIQUID ASSET ILLIQUIDITY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL SETTLEMENTS INVESTMENT OPPORTUNITIES LEVY LIQUID MARKET LIQUIDITY CRISIS LIQUIDITY RISK LOCAL CURRENCY LOCAL STOCK MARKET LOW COST MACROECONOMICS MARKET CAPITALIZATION MARKET DEPTH MARKET DOWNTURNS MARKET LIQUIDITY MARKET RETURNS MARKET VOLATILITY MUTUAL FUNDS POLITICAL ECONOMY PORTFOLIO PRICE CHANGE PRICE CHANGES PRICE DECLINES PRICE FLUCTUATIONS PRICE INCREASES PUBLIC COMPANY PURCHASES REPAYMENT RESEARCH ASSISTANCE RETURN RISK MANAGEMENT RISK PROFILES SALE SALES SECONDARY MARKET SECONDARY MARKET ACTIVITY SECONDARY MARKET LIQUIDITY SECONDARY MARKETS SECONDARY-MARKET SECURITIES SECURITY PRICES SOVEREIGN BOND SOVEREIGN RISK STOCK DATA STOCK EXCHANGE STOCK MARKET INDEX STOCK MARKETS STOCK PRICE STOCK PRICES STOCK RETURNS STOCK TRADING STOCKS SUPPLY CURVE TRADES TRADING TRADING ACTIVITY TRADING COST TRADING COSTS TRADING VOLUME TRANSACTION TRANSACTION COSTS TURNOVER VALUE OF ASSETS Whereas conventional wisdom argues that markets shut down during crises, with sellers struggling to find buyers, we find that markets continue to operate during financial turmoil, even in narrow and volatile emerging economies. Simple event studies indicate that both trading volume and trading costs increase in crisis times. Prices change more with each dollar transacted (pushing the Amihud illiquidity measure up) and bid-ask spreads widen. More generally, econometric estimates show that large price downturns, typical of crises, are associated with higher trading activity and increased trading costs, with trading activity declining only later as crises progress. Thus, while trading activity tends to be negatively related to trading costs during tranquil times (and across securities), this relation appears to break down during crises. These results are consistent with the analytical literature on portfolio rebalancing by heterogeneous agents in times of crises. 2012-06-08T17:39:24Z 2012-06-08T17:39:24Z 2007-12 http://documents.worldbank.org/curated/en/2007/12/8881183/emerging-market-liquidity-crises http://hdl.handle.net/10986/7549 English Policy Research Working Paper; No. 4445 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ASSET MARKETS ASSET PRICES ASYMMETRIC INFORMATION AVERAGE PRICE BID BOND BOND MARKET BOND SPREAD BUSINESS SCHOOL BUYERS CAPITAL OUTFLOWS CENTRAL BANK COLLATERAL COMMERCIAL BANK COMMON STOCK DEFAULT PROBABILITIES DEMAND CURVE DEPOSITS DOLLAR VALUE ECONOMETRICS EFFICIENT MARKET EMERGING ECONOMIES EMERGING MARKET EMERGING MARKETS EQUITY MARKETS EXCHANGE RATE EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DISTRESS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL RESEARCH FINANCIAL STUDIES FINANCIAL SYSTEM FUTURE RESEARCH GLOBAL FINANCIAL SYSTEM ILLIQUID ASSET ILLIQUIDITY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL SETTLEMENTS INVESTMENT OPPORTUNITIES LEVY LIQUID MARKET LIQUIDITY CRISIS LIQUIDITY RISK LOCAL CURRENCY LOCAL STOCK MARKET LOW COST MACROECONOMICS MARKET CAPITALIZATION MARKET DEPTH MARKET DOWNTURNS MARKET LIQUIDITY MARKET RETURNS MARKET VOLATILITY MUTUAL FUNDS POLITICAL ECONOMY PORTFOLIO PRICE CHANGE PRICE CHANGES PRICE DECLINES PRICE FLUCTUATIONS PRICE INCREASES PUBLIC COMPANY PURCHASES REPAYMENT RESEARCH ASSISTANCE RETURN RISK MANAGEMENT RISK PROFILES SALE SALES SECONDARY MARKET SECONDARY MARKET ACTIVITY SECONDARY MARKET LIQUIDITY SECONDARY MARKETS SECONDARY-MARKET SECURITIES SECURITY PRICES SOVEREIGN BOND SOVEREIGN RISK STOCK DATA STOCK EXCHANGE STOCK MARKET INDEX STOCK MARKETS STOCK PRICE STOCK PRICES STOCK RETURNS STOCK TRADING STOCKS SUPPLY CURVE TRADES TRADING TRADING ACTIVITY TRADING COST TRADING COSTS TRADING VOLUME TRANSACTION TRANSACTION COSTS TURNOVER VALUE OF ASSETS |
| spellingShingle |
ASSET MARKETS ASSET PRICES ASYMMETRIC INFORMATION AVERAGE PRICE BID BOND BOND MARKET BOND SPREAD BUSINESS SCHOOL BUYERS CAPITAL OUTFLOWS CENTRAL BANK COLLATERAL COMMERCIAL BANK COMMON STOCK DEFAULT PROBABILITIES DEMAND CURVE DEPOSITS DOLLAR VALUE ECONOMETRICS EFFICIENT MARKET EMERGING ECONOMIES EMERGING MARKET EMERGING MARKETS EQUITY MARKETS EXCHANGE RATE EXCHANGE RATES FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DATA FINANCIAL DISTRESS FINANCIAL INTERMEDIARIES FINANCIAL MARKETS FINANCIAL RESEARCH FINANCIAL STUDIES FINANCIAL SYSTEM FUTURE RESEARCH GLOBAL FINANCIAL SYSTEM ILLIQUID ASSET ILLIQUIDITY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INTEGRATION INTERNATIONAL SETTLEMENTS INVESTMENT OPPORTUNITIES LEVY LIQUID MARKET LIQUIDITY CRISIS LIQUIDITY RISK LOCAL CURRENCY LOCAL STOCK MARKET LOW COST MACROECONOMICS MARKET CAPITALIZATION MARKET DEPTH MARKET DOWNTURNS MARKET LIQUIDITY MARKET RETURNS MARKET VOLATILITY MUTUAL FUNDS POLITICAL ECONOMY PORTFOLIO PRICE CHANGE PRICE CHANGES PRICE DECLINES PRICE FLUCTUATIONS PRICE INCREASES PUBLIC COMPANY PURCHASES REPAYMENT RESEARCH ASSISTANCE RETURN RISK MANAGEMENT RISK PROFILES SALE SALES SECONDARY MARKET SECONDARY MARKET ACTIVITY SECONDARY MARKET LIQUIDITY SECONDARY MARKETS SECONDARY-MARKET SECURITIES SECURITY PRICES SOVEREIGN BOND SOVEREIGN RISK STOCK DATA STOCK EXCHANGE STOCK MARKET INDEX STOCK MARKETS STOCK PRICE STOCK PRICES STOCK RETURNS STOCK TRADING STOCKS SUPPLY CURVE TRADES TRADING TRADING ACTIVITY TRADING COST TRADING COSTS TRADING VOLUME TRANSACTION TRANSACTION COSTS TURNOVER VALUE OF ASSETS Levy Yeyati, Eduardo Schmukler, Sergio L. Van Horen, Neeltje Emerging Market Liquidity and Crises |
| relation |
Policy Research Working Paper; No. 4445 |
| description |
Whereas conventional wisdom argues that
markets shut down during crises, with sellers struggling to
find buyers, we find that markets continue to operate during
financial turmoil, even in narrow and volatile emerging
economies. Simple event studies indicate that both trading
volume and trading costs increase in crisis times. Prices
change more with each dollar transacted (pushing the Amihud
illiquidity measure up) and bid-ask spreads widen. More
generally, econometric estimates show that large price
downturns, typical of crises, are associated with higher
trading activity and increased trading costs, with trading
activity declining only later as crises progress. Thus,
while trading activity tends to be negatively related to
trading costs during tranquil times (and across securities),
this relation appears to break down during crises. These
results are consistent with the analytical literature on
portfolio rebalancing by heterogeneous agents in times of crises. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Levy Yeyati, Eduardo Schmukler, Sergio L. Van Horen, Neeltje |
| author_facet |
Levy Yeyati, Eduardo Schmukler, Sergio L. Van Horen, Neeltje |
| author_sort |
Levy Yeyati, Eduardo |
| title |
Emerging Market Liquidity and Crises |
| title_short |
Emerging Market Liquidity and Crises |
| title_full |
Emerging Market Liquidity and Crises |
| title_fullStr |
Emerging Market Liquidity and Crises |
| title_full_unstemmed |
Emerging Market Liquidity and Crises |
| title_sort |
emerging market liquidity and crises |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2007/12/8881183/emerging-market-liquidity-crises http://hdl.handle.net/10986/7549 |
| _version_ |
1764402767901753344 |