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Local Business Cycles and Local Liquidity

Published online by Cambridge University Press:  11 December 2015

Gennaro Bernile ,
George Korniotis ,
Alok Kumar  and
Qin Wang
Gennaro Bernile
Affiliation:
gbernile@smu.edu.sg, Singapore Management University, Chian School of Business, Singapore 178899, Singapore
George Korniotis*
Affiliation:
gkorniotis@miami.edu, University of Miami, School of Business Administration, Coral Gables, FL 33124
Alok Kumar
Affiliation:
akumar@miami.edu, University of Miami, School of Business Administration, Coral Gables, FL 33124
Qin Wang
Affiliation:
qin.wang@okstate.edu, Oklahoma State University, Spears School of Business, Tulsa, OK 74106.
*
*Corresponding author: gkorniotis@miami.edu
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Abstract

This study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 5 , October 2015 , pp. 987 - 1010
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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