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The introduction of regulated CME futures contracts on Bitcoin in 2017 raised an expectation that cryptocurrencies would become part of mainstream financial markets. This also heightened links between traditional markets and Bitcoin, implying that the cryptocurrency would be subject to systematic spillovers. This paper uses high‐frequency data to examine whether Bitcoin basis risk is linked to investor sentiment from established financial markets. Our findings indicate that extreme investor sentiment, as reflected by the tail risk in various volatility indices, including the VIX, consistently correlates with a negative Bitcoin basis, where Bitcoin futures prices are lower than spot prices. Fluctuations significantly influence this relationship in the trading volume of Bitcoin futures and are more pronounced during periods of substantial unexpected inflation and deflation. These results underline the complex dynamics between market sentiment and cryptocurrency pricing, offering insights with substantial implications for investors and policymakers. [ABSTRACT FROM AUTHOR]

The growth of FinTech has increasingly attracted the attention of financial industry players. The speed and complexity with which new financial technologies have spread around the world have created regulatory challenges for the United States and Canadian authorities. Unlike the United States, where there is regulatory fragmentation and a supervisory instrument with regulatory relief, Canada has a more integrated regulatory approach managed by regulatory sandbox principles. The aim of this article is to study and compare the impact of FinTech adoption on commercial banks over the 2018–2023 period in the United States and Canadian FinTech ecosystems. The results essentially show that FinTech has a positive impact on commercial banks' performance and financial growth, and a negative impact on liquidity and financial risk. Our results present several contributions and mainly show that: (1) In the presence of multiple entry channels for FinTech startups, the impact of FinTech on financial performance is higher in the United States than in Canada. (2) Because of its regulatory approach, Canada lags behind the United States in the adoption rate of financial technologies. (3) Balance of power in the financial sector induces commercial banks not to consider FinTech startups as threats but rather as partners that offer opportunities for expertise and reduced regulatory costs. Finally, FinTech can be disruptive and presents many challenges for regulators given the complexity and speed of innovation it promotes. [ABSTRACT FROM AUTHOR]

What caused the 1929 crash of the New York Stock Exchange? This paper quantitatively studies liquidity during the 1929 crash of the NYSE. I evidence that the crash represented a liquidity crisis due to the liquidation of brokers' margin loans. Applying recent estimators of effective spreads and liquidity conditions from contemporary finance literature suggests a four‐fold increase in spreads during the crash at the aggregate level. At the individual stock level, quoted bid‐ask spreads suggest that liquidity explains one‐fifth of the variance in daily stock returns during the crash. [ABSTRACT FROM AUTHOR]

High‐frequency trading (HFT) and algorithmic trading (AT) have attracted considerable attention from the academic and regulatory communities, often highlighted for their contributions to enhancing market liquidity. However, the distinctive market framework in China may alter the operational dynamics of intraday trading, indicating that traditional HFT/AT paradigms might not fully apply. This study investigates the evolution of market quality in China from an HFT/AT perspective, using publicly available high‐frequency data for six futures products traded on the Shanghai Futures Exchange and the Dalian Commodity Exchange. Our findings reveals improvements in contract continuity and liquidity diversification from a daily perspective. Furthermore, the intraday analysis—especially following the increased availability of more granular data to market participants—suggests the emergence of more sophisticated algorithmic traders who enhance liquidity provision and contribute to reduced slippage costs for investors and hedgers. [ABSTRACT FROM AUTHOR]

Since the S&P 100 Index underlies both American (OEX) and European (XEO) options, the value of the early exercise premium of American options can be directly observed. We find that the mid‐quote of an XEO option can be higher than that of an otherwise identical OEX option, and liquidity can explain this overpricing phenomenon of European options. Our results show that illiquid options are significantly overpriced in the S&P 100 Index options market. This finding indicates that an illiquid option can be overvalued with a higher market offer price, which is the requirement of market makers for compensation for providing liquidity. [ABSTRACT FROM AUTHOR]

Liquidity is an important characteristic of financial markets, affecting portfolio decisions and priced risk. During periods of market turmoil, such as occurs during financial crisis, investors have an elevated need for cash and so understanding how liquidity differs during those periods is important. We examine how stock market liquidity was impacted by two crises with distinct origins, the global financial crisis (GFC) and the COVID‐pandemic. Our sample includes the S&P/ASX200 constituents for the period January 2005–December 2020. We find that the Australian stock market is less liquid during both crisis periods; spreads are wider, depth is lower, and price impact is larger (stock prices move a lot in response to small amounts of volume). Although the magnitude of the liquidity change is greater at the onset of COVID, the duration of the impact is longer during the GFC, resulting in a larger average effect. While trading volume declines during the GFC, it increases during COVID. Our results are robust to alternate liquidity proxies, methodologies and crisis period identification, and generally applicable across stock sectors. [ABSTRACT FROM AUTHOR]

We exploit a 2018 exchange‐mandated increase of the maximum order size in some—but, crucially, not all—US agricultural futures markets, to link exogenous constraints on order placement and execution, price volatility, and market liquidity. The old maximum size of 2500 contracts was binding: demand exists for placing and executing much larger orders. Limit‐order book depth at the best bid and ask increases dramatically after the exchange quadruples the maximum order size. Amid relatively stable volatility, bid‐ask spreads narrow, and the price impact of large trades falls. In sum, we find that market quality can improve after an increase in maximum order and trade size. [ABSTRACT FROM AUTHOR]

This is the first paper in the literature to focus on CMBX price formation with dual techniques of liquidity estimation. In this paper, we introduce a generalizable method using principal component analysis to estimate daily risk decompositions of default, interest rate, liquidity and excess liquidity from previously simulated reduced form monthly risk decompositions. Our method generates these measures for CMBX. To assess liquidity estimates, we compare our risk decomposition measures of liquidity to classical microstructure effective bid–ask spreads, daily. We find our measures to be significant in explaining effective bid–ask spreads over 12 years of daily history and in 20‐day forecasts. [ABSTRACT FROM AUTHOR]

Using data from the 2009–2020 Agricultural Resource Management Surveys, we compare the financial position and performance of African American farms to that of other U.S. farms. The results suggest that, relative to others, the average African American farm has lower total value of production, net cash farm income, government payments, assets, and debts. We obtained mixed results regarding financial performance, with African American farms having lower profitability, liquidity, and efficiency than others but higher solvency. To our knowledge, this study is the first to provide a contemporary overview of the status of African American farms using detailed, farm‐level financial data. [ABSTRACT FROM AUTHOR]

We identify three interrelated behavioral outcomes of the duration‐dependent seller's stamp duty (SSD) implemented in the Singaporean private housing market and examine how it reduces market liquidity. An SSD lowers lock‐in home sellers' opportunity cost of holding their properties through the lock‐in period thresholds. Consequently, their selling prices are higher than non–lock‐in home sellers. An SSD lowers their probability of home sales; the magnitude of this effect depends on the SSD's tax rate and tax rate deduction across a threshold. Moreover, an SSD drives some lock‐in home sellers to lease out the properties at lowerents. [ABSTRACT FROM AUTHOR]

The article delves into the challenges and risks encountered within the U.S. Treasury market, with a specific emphasis on liquidity concerns and the implications of regulatory measures, notably central clearing mandates. It scrutinizes recent events, such as the liquidity trap triggered by the COVID-19 crisis in March 2020, and analyzes the role of margin calls and collateralization mechanisms in exacerbating market volatility.

This study examines whether digital technologies and exporting activities are associated with the likelihood of bankruptcy, liquidity issues and overdue financial obligations during the COVID‐19 pandemic. Restrictive measures and lockdowns during the pandemic led to the loss of revenue while incurring costs, resulting in financial issues. Using a sample of 8633 firms from the Central and Eastern economies, we estimate a logistic model and find the following: digitalisation is associated with a decrease in the likelihood of liquidity issues and overdue financial issues; exporting firms experience similar financial outcomes to non‐exporting firms; firms that expect or receive government support are associated with an increase in the probability of facing financial issues. Policy implications are discussed. [ABSTRACT FROM AUTHOR]

This paper documents that in distress periods, liquidity constrained investors sell liquid corporate bonds and hold onto illiquid ones, a phenomenon which we refer to as flight from liquidity. Performing within issuer‐time analysis to properly control for credit risk, we find that flight from liquidity results in a decline in the liquidity premium. In other words, liquid bonds that are significantly more expensive in normal market conditions, lose more value in distress periods and trade at a closer, and sometimes at an indistinguishable, yield spread to their illiquid peers from the same issuer. We also find that these shocks to the liquidity premium are short‐lived and do not have a long‐lasting pricing impact. We provide suggestive evidence that the liquidity clientele effect derives these results. Our findings suggest that investment exposure to liquid bonds entails a unique risk arising during periods of distress. [ABSTRACT FROM AUTHOR]

By purchasing larger quantities of goods and saving them for future consumption households are able to reduce transaction costs and acquire goods at a lower price per unit, presuming they can manage the transportation and storage costs. This study uses variations in state income tax refunds over time to estimate consumption responses to lump‐sum payments. Households purchase around 20 per cent more of easily stored toilet paper in the months in which tax refunds are issued, but do not increase purchases of perishables such as bread and eggs. In addition to purchasing more goods at a lower per‐unit price, households also appear to increase the time until their next purchase, which implies that they are saving goods for consumption over time. These in‐kind savings allow people to smooth their consumption over time, much like pecuniary savings. Government payments that provide lump‐sum payments can benefit consumers by providing additional liquidity to buy and store goods at a lower cost. [ABSTRACT FROM AUTHOR]

The role of bank liquidity in monetary policy transmission has received insufficient attention in the literature. Faced with monetary tightening, banks with more liquidity can sell off securities and protect their loan portfolios. We test this proposition using panel data for Indian banks during 2005–2020. Employing dynamic threshold panel regressions with liquid assets as the threshold variable, we show that bank lending declines with monetary policy tightening in low liquidity regimes, but not in high liquidity regimes. We also find evidence for different portfolio reallocation behaviour by banks in high versus low liquidity regimes in response to monetary policy changes. [ABSTRACT FROM AUTHOR]

This study shows that the geographic network of public firms facilitates the propagation of local economic conditions across the United States. We identify economic connections among U.S. states based on the 10‐K listings of public firms and show that the returns and liquidity of firms headquartered in connected states exhibit excess comovement. The economic connections also generate spillover effects where the economy of a state affects its connected states and amplifies the impact of local economic conditions on the U.S. economy. In particular, a 1% production increase in a large state like California is associated with a 6.71% change in annual U.S. GDP growth, relative to average GDP growth. [ABSTRACT FROM AUTHOR]

This paper examines whether larger tick sizes improve or hinder price efficiency for small‐capitalization stocks using data from implementing and terminating the Tick Size Pilot Program (TSPP). We show that the TSPP led to increases in various liquidity measures, and its termination restored them to their pre‐TSPP levels. We also find evidence that the TSPP led to trader migration from the pilot to control stocks. The TSPP implementation (termination) is associated with decreases (increases) in price efficiency, indicating that price efficiency decreases with tick sizes. Liquidity and informed trading are two channels through which the TSPP changes price efficiency. [ABSTRACT FROM AUTHOR]

We investigate the relationship between firms' cash holdings and pandemics. Our results show that compared to tele‐workable firms, whose employees can work remotely, non‐tele‐workable firms with more on‐site employees increase cash during pandemics. This increase in cash comes from short‐debt, preferred stocks, reduction in capital expenditures, discontinuation of some operations and lower tax payments. Firms hold more cash as a reaction to higher default risk. For non‐tele‐workable firms, there is a positive relationship between abnormal stock returns and cash, suggesting that this increase in cash during pandemics is not driven by behavioral reasons but by increases in uncertainty in labor productivity. [ABSTRACT FROM AUTHOR]

The illiquidity status of financial institutions widens up the financial stability gap, hence affecting other economic agents that depend on the financial sector. The objective of the study is to determine how the financial stability gap affects private investment in sub‐Saharan Africa (SSA). Annual time series secondary data from 33 SSA countries for the period 2007–2018 was used. Using the general methods of moments (GMM) estimation technique, we found that the financial stability gap beyond 109.9% becomes detrimental to private sector investment while government effectiveness and investment by the government improve private investment. The study recommends that financial institutions undertake liquidity protection measures as a means of protecting the stability status, while SSA governments invest in the economy and provide the needed business environment for private sector investment. [ABSTRACT FROM AUTHOR]

We provide first insights into secondary market trading, liquidity determinants, and the liquidity premium of catastrophe bonds. Based on transaction data from TRACE (Trade Reporting and Compliance Engine), we find that cat bonds are traded less frequently during the hurricane season and more often close to maturity. Trading activity indicates that the market is dominated by brokers without a proprietary inventory. Liquidity is high in periods of high trading activity in the overall market and for bonds with low default risk or close to maturity, which results from lower order processing costs. Finally, using realized bid–ask spreads as a liquidity measure, we find that on average, 21% of the observable yield spread on the cat bond market is attributable to the liquidity premium, with a magnitude of up to 141 bps for high‐risk bonds. [ABSTRACT FROM AUTHOR]

Motivated by the mixed results of the few prior studies, we focus on the short‐term price performance of stocks added to or deleted from the CSI 300 Index. Consistent with the price pressure hypothesis, we evidence a temporary change in the prices of respective added and deleted stocks, followed by subsequent price reversions. To reconcile past studies, we also test several explanatory factors as potential sources of short‐term price pressure. Results show that changes in investor trading behaviour, investor awareness, firm risk, and liquidity explain the short‐term price pressure of added and deleted stocks, while changes in institutional trading, realised volatility, and liquidity explain the differences in the impact of reconstitutions between added and deleted stocks. [ABSTRACT FROM AUTHOR]

We study the effects of COVID‐19 intensity on equity market liquidity across U.S. states. We exploit cross‐sectional variation in cases and deaths to investigate any association with the deterioration of stock liquidity of firms whose headquarters or operations are in the corresponding state(s). Our motivation stems from several underlying economic channels such as order processing costs, inventory costs, and adverse selection costs. We find strong negative relations between pandemic intensity and various intra‐day liquidity measures. Our results are more pronounced for firms operating in states with more stringent containment and health measures and within industries with greater risk exposure. [ABSTRACT FROM AUTHOR]

This study investigates how stock liquidity affects the compensation incentives faced by the directors on the board. The results show that the proportion of cash‐based compensation in the directors' compensation package increases when the firm's shares are less liquid: a one standard deviation increase in the bid‐ask spread from the mean is associated with a 3% larger fraction of cash in the directors' compensation package. The effect is more pronounced for firms whose management does not issue Earnings Per Share (EPS) guidance and for firms whose Chief Executive Officers (CEOs) themselves have higher pay in cash and lower pay in the form of equity. These results suggest the compensation incentives offered to directors in firms with illiquid shares result in the interests of shareholders being less aligned with those of the directors compared with firms with liquid shares. [ABSTRACT FROM AUTHOR]

We show that profit‐seeking institutional investors provide valuable liquidity and spur the recovery of distressed housing markets. Using a quasi‐natural experiment wherein investors purchased prepackaged distressed home portfolios from government‐sponsored enterprises, we find that transaction prices of properties located within 0.25 miles of bulk‐sale properties increased by 1.4% more than homes located farther away. This positive price spillover effect helped reverse the discounts at which such properties were being sold prior to the bulk‐sale event. The price spillover effect due to the bulk‐sale event is greater for foreclosed homes (4.1%), homes similar to the bulk‐sale homes (2.5%), and homes in highly distressed neighborhoods (7.0%). Our results highlight asset disposition through pooling and institutional participation as a potential market‐driven channel for the recovery of distressed housing markets. [ABSTRACT FROM AUTHOR]

This study demonstrates the impact of initial public offerings (IPOs) on local house prices. Applying spatial difference‐in‐differences methods to IPOs in California from 1993 to 2017, we find house prices increase by 0.7%–0.9% near an IPO firm's headquarters around filing and issuing dates. Upon lockup expiration, price changes depend on postissuance returns. Treating the San Francisco Bay as a commuting barrier, we identify sustained price increases after filings and temporary increases after issuing and lockup expiration. We also confirm post‐IPO price divergence between the treatment and synthetic control areas. Our findings indicate the effect of liquid wealth under mild financial constraints. [ABSTRACT FROM AUTHOR]

This study examines the asset–stock liquidity relationship for firms with location‐specific assets. Using a sample of real estate investment trusts (REITs), we extend the concept of asset liquidity to include information based on local property market turnover. Our findings confirm that holding more cash increases REIT stock liquidity. More importantly, we find a positive relation between property market liquidity and REIT stock liquidity. This relation is stronger for REITs with lower growth opportunities, less information advantage, and greater financial constraints. Our findings also provide evidence that managers can actively influence stock liquidity through asset structure. [ABSTRACT FROM AUTHOR]

We examine the effects of a shortened settlement cycle on liquidity. Our difference‐in‐difference results show that securities listed on US stock exchanges become more liquid, relative to similarly matched securities listed on the London Stock Exchange, after the standard settlement cycle in the United States was reduced from T+3 to T+2. These results hold across various low‐ and high‐frequency measures of liquidity and empirical model specifications. Furthermore, we find that securities that are more difficult‐to‐borrow experience the greatest gains in liquidity. Our findings might provide insights to regulators and exchange officials considering the adoption of a shortened settlement cycle. [ABSTRACT FROM AUTHOR]

In the past few years, the lean hog and live cattle futures markets have experienced significantly heightened volatility and frequent limit moves. In this paper, we study whether price limits help resolve uncertainty and facilitate liquidity provision in the two markets and how they affect trading in the limit‐free options market. In contrast to previous literature that is based on daily data, we use intraday futures and options data from 2014 to 2019 that allows for a better characterization of market behavior around limit moves. Consistent with microstructure theories, we find that price limits neither reduce volatility nor improve liquidity. Instead, they add to the high uncertainty that precedes the limit move, leading to significantly higher volatility and lower liquidity when trading resumes. Further, contrary to the notion that trading migrates to the limit‐free options market, options volume drops and liquidity drains during limit moves. The options‐implied futures price is only a biased, inefficient, and highly noisy estimate of the equilibrium futures price on locked‐limit days. Overall, the findings suggest that rather than allowing the markets to cool off, price limits adversely affect market quality in presence of large price movements. [ABSTRACT FROM AUTHOR]

The prices of European‐style derivative warrants in Hong Kong are generally higher than those of identical American‐style options. We show that liquidity differences have strong explanatory power for this overpricing behavior, especially for low moneyness and long‐term derivatives. Other causative factors include counterparty credit risk, investor preference, information asymmetry, volatility discovery, exercise style, market makers' behavior, and investor sentiment. We also find a big gap in market‐wide liquidity between the two markets. Specifically, lower liquidity results in the weaker efficiency of the options market compared with the derivative warrants market. [ABSTRACT FROM AUTHOR]

This paper contributes to the equity premium prediction literature by studying the performance of rarely or not researched predictors. To do so, we analyze the ability of state‐of‐the‐art liquidity and uncertainty predictors to beat the historical average when forecasting the monthly US equity premium. For this purpose, we apply an out‐of‐sample predictive regression approach to analyze statistical accuracy as well as economic gains of equity premium forecasts. Our findings show that the treasury‐eurodollar (TED) spread, as well as the macroeconomic uncertainty measure, is able to beat the historical average and provide robust predictions in various business cycles. Moreover, these two economic predictors also beat forecasts of a classical time series model. [ABSTRACT FROM AUTHOR]

This study investigates the potential simultaneous relationships among leverage, debt maturity and cash holdings and how these jointly affect financial policy and firms' investment activities in developing countries of Thailand, Indonesia and Singapore during the period 2006–2015. Using the two‐step system GMM estimator, our results show that high‐growth firms not only shorten debt maturity to reduce the underinvestment incentive, but also decrease leverage to reduce liquidity risk. We find evidence that the level of cash holdings is a key determinant of leverage in all countries and that debt policy and growth opportunities affect the investment decision of firms in Thailand and Singapore whereas cash policy is more important in Indonesia. These findings have significant implications for investment decisions in these economies. [ABSTRACT FROM AUTHOR]

Limited partners (LPs) of private equity funds commit to invest with extreme levels of illiquidity and significant uncertainty regarding the timing of capital flows, often exacerbated by the LPs' spending requirements and portfolio rebalancing needs. Secondary markets have emerged that alleviate some of the associated cost. This paper develops a valuation model incorporating these institutional features. Model‐implied breakeven returns match empirically observed average fund returns for moderately risk‐tolerant LPs with private equity allocations up to 40%. In contrast, when earning average returns in private equity, highly risk‐averse LPs optimally allocate only a few percent to the asset class. [ABSTRACT FROM AUTHOR]

We present a model that links the opacity of an asset to its liquidity. We show that while low‐opacity assets are liquid, intermediate levels of opacity provide incentives for investors to acquire private information, causing adverse selection and illiquidity. High opacity, however, benefits liquidity by reducing the value of a unit of private information. The cross‐section of bid–ask spreads of US firms is shown to be broadly consistent with this hump‐shaped relationship between opacity and illiquidity. Our analysis suggests that uniform disclosure standards may be suboptimal; efficient disclosure can instead be achieved through a two‐tier standard system or by subsidizing voluntary disclosure. [ABSTRACT FROM AUTHOR]

We formulate a generalization of the traditional medium‐of‐exchange function of money in contexts where there is imperfect competition in the intermediation of credit, settlement, or payment services used to conduct transactions. We find that the option to settle transactions with money strengthens the stance of sellers of goods and services in relation to intermediaries, and show this mechanism is operative even for sellers who never exercise the option to sell for money. These latent money demand considerations imply that in general, in contrast to current conventional wisdom in policy‐oriented research in monetary economics, monetary policy can remain effective through medium‐of‐exchange transmission channels—even in highly developed credit economies where the share of monetary transactions is negligible. [ABSTRACT FROM AUTHOR]

In this paper we investigate the interaction between liquidity and information in the options market and its impact on the pricing of the underlying asset. We model option trade duration and volume jointly, for the first time, as a natural measure of options' trading intensity and we associate it with differential degrees of information present in option trades. We report a highly significant association between option trading intensity with contemporaneous and future underlying volatility and returns, which is robust to the presence of other information measures, market factors, and structural forms. [ABSTRACT FROM AUTHOR]

This study examines the influences of different types of uncertainty, namely, World Uncertainty (WUI), Global Economic Policy Uncertainty (GEPU), and Geopolitical Uncertainty (GUI) on the returns and liquidity of 964 cryptocurrencies over the period from April 28, 2013 to July 14, 2018. Besides the full sample, three sub‐portfolios are separated by market capitalization. The principal findings are: (i) increased GEPU has significantly negative effect on the cryptocurrency portfolios' returns; (ii) higher WUI has significantly negative impact on the cryptocurrency portfolios' liquidity, especially for the medium sub‐portfolio; (iii) the effects of uncertainty proxied by GEPU and WUI on cryptocurrency portfolios' returns and liquidity, respectively, are asymmetric; and (iv) GUI is not found to have any significant impact on the returns and liquidity of cryptocurrency portfolios. [ABSTRACT FROM AUTHOR]

The effectiveness of Financial Transaction Taxes (FTTs) for deterring speculative trading and improving market quality remains controversial. Studying the FTT imposed in 2012 on large‐cap stocks traded on the Euronext Paris, we find that stocks subject to the FTT subsequently experience significantly decreased turnover and increased spreads relative to the untaxed peers. Further tests suggest that the FTT imposition induces investors to migrate their trades and results in less informativeness in the taxed stocks. Collectively our findings support the view that FTTs deter informed trades and reduce market quality. [ABSTRACT FROM AUTHOR]

The research aims to investigate the impact of increased capital requirements and high liquidity levels on the profitability of European banks in the post crisis period. The study examines the largest banks in the European Union spanning 28 countries using data from 2010 to 2018. It used three measures to define bank profitability: return on average assets, return on average equity, and operating profit to risk weighted assets. Capital, liquidity, size, and asset quality represent bank specific determinants, while economic growth and inflation are considered as the main external determinants having influence on profitability. We used multiple regression models to analyze the association amongst the variables. The results revealed a positive and significant association between liquidity level and bank performance. Asset quality showed a negative and statistically significant influence on bank performance, while economic growth and inflation have no significant influence on bank performance. The study concludes that there is limited influence of the Basel III on bank profitability although the policy is important in achieving banking stability. This study contributes to the literature by empirically analyzing the impact of capital regulation on bank performance for the biggest banks in Europe. Although the Basel III framework is important for prudential banking, its effects on the performance of European bank is debatable. [ABSTRACT FROM AUTHOR]

We study how quickly liquidity is replenished on the order book in E‐mini futures. The results show that participants who use patient methods, such as limit orders, are often fast to place new orders, while those using impatient market orders are slow to re‐enter the market. These delays are a function of state constants, such as firm types, state conditions, such as whether the order is price improving, and time‐varying covariates, such as the volume of trade during the gap. We also find support for the view that certain traders delay providing liquidity during active markets to avoid informed trading. [ABSTRACT FROM AUTHOR]

This paper examines a small random liquidity shock to reveal the effect of liquidity constraints on late payment behavior. In Jerusalem, water bill due dates are randomly determined and therefore may occur just before or after social security paydays. We compared the likelihood of late payments by low‐income households when they receive their social benefits a day after the water bill due date to the likelihood of late payment by the same households when they receive their benefits a day or more before the water bill due date. Using a large administrative data set, we found that a small random liquidity shock leads to a substantial increase in late payments of more than 10 percentage points among income support recipients and around 6 percentage points for old‐age pension recipients with supplementary income. The mismatch between utility payment due dates and paydays may result in interest charges and high late fees, contributing to the poverty penalty. Key Points: The unintended misalignment between social security paydays and water bill due dates increase the likelihood of late payments water billsA liquidity shock in the amount of a bimonthly water bill results in a 10.3% increase in late payments among recipients of income supportOur findings may provide utility regulators with insights into the desired timing of due dates for bill payment and late fees policy [ABSTRACT FROM AUTHOR]

One of the proposals that have been brought forward regarding ways of discouraging banks from taking unnecessary risk, widely debated these days, is the introduction of taxes in the financial sector. Although recent empirical investigations document a positive effect of the bank levies (BL), it may also reduce banks' activity. In this paper, we aim to analyse the Polish BL on assets. Poland's interbank market might be affected by a new BL introduced in 2016, as interbank positions of the balance sheet have been also taxed. The analysis covers the panel structure of data of Polish banks with unconsolidated financial statements. To evaluate the impact of the BL on the above interbank market features, we use the OLS regression with fixed effects in relation to the bank. Data has been sourced from OrbisFocus and Central Banks' websites and covers the period 2011–2017. The result demonstrates that the BL on assets applied in Poland has a negative impact on the interbank market. Estimation results shows that the BL on assets significantly decrease the value of 1y and increases the value of 3 months interbank loans. In addition, the BL on assets in the banking sector positively affects the value of government securities and negatively affects the interest income on interbank loans. Moreover, the dispersion of 1 and 3 months quotations was reduced as a result of the BL introduction. In case of short‐term transactions, dispersion amplifies. Additionally, the volatility of quotation decreases due to reduced trading after the BL implementation. [ABSTRACT FROM AUTHOR]

We introduce a methodology to visualize the limit order book (LOB) using a particle physics lens. Open‐source data‐analysis tool ROOT, developed by CERN, is used to reconstruct and visualize futures markets. Message‐based data is used, rather than snapshots, as it offers numerous visualization advantages. The visualization method can include multiple variables and markets simultaneously and is not necessarily time dependent. Stakeholders can use it to visualize high‐velocity data to gain a better understanding of markets or effectively monitor markets. In addition, the method is easily adjustable to user specifications to examine various LOB research topics, thereby complementing existing methods. [ABSTRACT FROM AUTHOR]

We study the effects of exchange uplisting from the modern over‐the‐counter (OTC) markets on liquidity, volatility, and price discovery. In a series of difference‐in‐differences tests, we find that for a sample of OTC treatment firms that uplist to the NASDAQ, New York Stock Exchange (NYSE), or NYSE MKT, relative to matched control firms, liquidity improves dramatically after listing. We also show that price discovery improves for treatment firms vis‐à‐vis control firms after listing. The results contribute to the discussion surrounding the facilitation of capital formation and offer important insights to investors, managers, and exchange officials. [ABSTRACT FROM AUTHOR]

Most assets clear independently rather than jointly. This paper presents a model based on the uniform‐price double auction which accommodates arbitrary restrictions on market clearing, including independent clearing across assets (allowed when demand for each asset is contingent only on the price of that asset) and joint market clearing for all assets (required when demand for each asset is contingent on the prices of all assets). Additional trading protocols for traded assets—neutral when the market clears jointly—are generally not redundant innovations, even if all traders participate in all protocols. Multiple trading protocols that clear independently can be designed to be at least as efficient as joint market clearing for all assets. The change in price impact brought by independence in market clearing can overcome the loss of information, and enhance diversification and risk sharing. Except when the market is competitive, market characteristics should guide innovation in trading technology. [ABSTRACT FROM AUTHOR]

This study examines the effects of product characteristics on the choice of payment methods for international trade. I develop a theoretical model that leads to two new testable hypotheses. First, as the transaction value increases, exporters tend to choose safer payment methods, such as letters of credit, rather than post‐shipment payments. Second, if the products in the transaction are easily liquidated, exporters tend to choose safer payment terms. Product‐destination‐level export data from Korean exports declaration forms support both hypotheses. Furthermore, the results using these comprehensive data on tradable goods and countries generalize the findings of previous studies on country characteristics. [ABSTRACT FROM AUTHOR]

Capital structure is considered one of the most debatable and controversial subjects in corporate finance. However, little is known about capital structure determinants of firms in the South Asian region. This study attempts to address the gap by not only investigate the impact of firm and country‐specific factors on firms' capital structure across the South Asian Association for Regional Cooperation (SAARC) region but also offer a cross‐country comparison. Results reveal significant relationships between tangibility, profitability, liquidity, firm size, stock market development, economic growth and firm leverage, suggesting that firms in the region are more likely to make their capital structure decisions following pecking order theory. We also find significant differences across countries and debt maturities. [ABSTRACT FROM AUTHOR]

In this paper, we look specifically at the effect of industry volatility on momentum returns, a phenomenon that has been overlooked in previous studies. We find that industry volatility has asymmetric effects on the winner and loser portfolios. The cross‐sectional variation in the returns of high and low‐volatility winners is driven primarily by industry volatility. It disappears after controlling for the effect of industry volatility on total firm volatility. However, for firms in the loser portfolios, the differential return between high and low volatile stocks remains even after adjusting for industry volatility. This implies that momentum returns are mainly induced by industry specific news at the winners' level and firm‐specific factors at the losers' level. The results are robust even after controlling for different levels of liquidity. [ABSTRACT FROM AUTHOR]

Focusing on index additions, which provoke buying pressure by large investors, we analyze the trading activities of short sellers around these events. Using daily short‐selling data from Japan, we find that short sellers exploit profitable opportunities through their liquidity provision activities. Short sellers earn profits by selling short right before the effective date of index additions and buying back after the effective date. The results suggest that short sellers exploit profitable opportunities due to anticipated buying pressure. [ABSTRACT FROM AUTHOR]

Liquidity concerns are oft raised when considering wealth taxes, yet the issue has received scant attention in the extant literature. In this paper we provide the first comprehensive review of the liquidity problem. Our aims are to estimate the scale of the problem, to explore the extent to which archetypal examples are at risk of experiencing low liquidity, and to review the policy options to reduce the scale and impact of liquidity challenges. Using data from Round 6 of the Wealth and Assets Survey, we demonstrate that the scale of the problem depends largely on conceptual and design issues. We find that farmers and business owners are commonly over‐represented in the low‐liquidity group, but there is little evidence to support the typical narrative surrounding single pensioners. Finally, we conclude our review with a number of preferred solutions to address liquidity issues, including recognising that a net wealth tax can be paid out of income or by sale of assets, by withholding tax (e.g. by pension providers), by borrowing/financing, deferred payment arrangements and, possibly in limited circumstances, payment in specie. [ABSTRACT FROM AUTHOR]

Monetary policy and financial regulation have been regarded one of the paradigmatic domains where states can reap the benefits of delegating clearly delineated and unequivocal policy tasks to specialized technocrats. This article discusses the negative side‐effects and unintended consequences of particular ways to partition such tasks. The separation between monetary policy formulation, central banks' money market management, and financial supervision has weakened policy makers' capacities to address risks associated with banks' active liability management and to mitigate pro‐cyclical dynamics in money markets. These adverse effects derive from the neglect of liquidity as a regulatory problem in formal task descriptions; from the obstacles to positive coordination between specialized technocrats in the self‐contained domains of monetary policy formulation, implementation, and prudential regulation; and from a dissociation between formal responsibilities, which lie with regulators, and the resources residing in money market divisions – market expertise and influence over counterparties – that are critical to influence bank behavior. I explore these mechanisms with an in‐depth case study of British monetary and financial governance between 1970 and 2007. I posit that we can generalize the respective mechanisms to explore unintended effects of 'agencification' and to contribute to a broader re‐assessment of those organizing principles that have guided the construction of 'new regulatory states'. [ABSTRACT FROM AUTHOR]