Does the uncertainty of firm-level fundamentals help explain cross-sectional differences in liquidity commonality?

Isshaq, Zangina and Faff, Robert (2016) Does the uncertainty of firm-level fundamentals help explain cross-sectional differences in liquidity commonality?. Journal of Banking and Finance, 68 153-161. doi:10.1016/j.jbankfin.2016.02.012


Author Isshaq, Zangina
Faff, Robert
Title Does the uncertainty of firm-level fundamentals help explain cross-sectional differences in liquidity commonality?
Journal name Journal of Banking and Finance   Check publisher's open access policy
ISSN 0378-4266
1872-6372
Publication date 2016-07-01
Year available 2016
Sub-type Article (original research)
DOI 10.1016/j.jbankfin.2016.02.012
Open Access Status Not Open Access
Volume 68
Start page 153
End page 161
Total pages 9
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Collection year 2017
Language eng
Abstract Our goal is to better understand the economic sources of commonality in liquidity. To this end, we argue that a firm with low (high) volatility in its “fundamental” profitability will have a higher (lower) liquidity commonality because it is more (less) likely to serve as reference stock in the setting of cross-asset learning about fundamentals. As predicted, we find that commonality in liquidity is negatively related to profitability volatility. This negative relation holds after controlling for correlated trading, size, book-to-market effects, idiosyncratic volatility, stock returns, and managerial income smoothing.
Keyword Profitability volatility
Commonality in liquidity
Learning
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
UQ Business School Publications
 
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