Two Essays on Stock Liquidity

Two Essays on Stock Liquidity

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This dissertation consists of two empirical essays on investor behavior and liquidity variation. The results demonstrate the important role of investors in affecting liquidity. The first essay examines how the fluctuation in the aggregate stock market liquidity is related to investor sentiment. I find that the stock market is more liquid when investor sentiment is higher. This evidence is consistent with the theoretical prediction that higher investor sentiment increases stock market liquidity. The second essay investigates whether the cross-sectional differences in liquidity are affected by institutional ownership. I document that stocks with larger increases in the number of institutional investors are more liquid than other stocks. This result is consistent with the prediction that information competition among institutional investors increases stock liquidity.The third measure is the VIX index. The VIX index is the implied volatility computed based on real-time prices of Saamp;P 100 index options. The VIX index reflects investorsa#39; consensus view of future expected stock market volatility. Compared toanbsp;...

Title:Two Essays on Stock Liquidity
Author: Shuming Liu
Publisher:ProQuest - 2008

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