Butt, HA and Virk, NS
(2022)
Momentum crashes and variations to market liquidity.
International Journal of Finance and Economics, 27 (2).
pp. 1899-1911.
ISSN 1076-9307
Abstract
We document that the variation in market liquidity is an important determinant of momentum crashes that is independent of other known explanations. This relationship is driven by the asymmetric large return sensitivity of short-leg of momentum portfolio to changes in market liquidity that increases the tail risk of the momentum strategy in panic states. Identifying this partly explains the forecasting ability of known predictors of tail risk of the momentum strategy. The contemporaneous increase in market liquidity explains, to some extent, the documented negative relationship between predictors and future momentum returns. Our findings are robust to the use of alternative measures of market liquidity that share a common source of variation in aggregate liquidity.
| Item Type: |
Article
(Article)
|
| Peer-reviewed: |
Yes
|
| Date Deposited: |
27 Nov 2023 11:45
|
| Publisher: |
Wiley |
| Additional Information: |
This is the peer reviewed version of the following article: Butt, HA, Virk, NS. Momentum crashes and variations to market liquidity. Int J Fin Econ. 2022; 27: 1899–1911, which has been published in final form at https://doi.org/10.1002/ijfe.2249. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited. |
| Divisions: |
Faculties > Business and Law |
| Subject terms: |
1502 Banking, Finance and Investment, Economics |
| Data Access Statement: |
The data that support the findings of this study is available from Kenneth French's data library: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html. The specific data, including measures of market liquidity, that support the findings of this study are available from the corresponding author upon request. |
| URI: |
https://e-space.mmu.ac.uk/id/eprint/633394 |
| DOI: |
https://doi.org/10.1002/ijfe.2249 |
| ISSN |
1076-9307 |
| e-ISSN |
1099-1158 |
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