Commonalities in Liquidity: Evidence and Intraday Patterns in the Brazilian Market

Authors

  • Fernanda Gomes Victor Universidade Federal do Rio Grande do Sul - UFRGS
  • Marcelo Scherer Perlin Universidade Federal do Rio Grande do Sul
  • Mauro Mastella Univesidade Estadual do Rio Grande do Sul

DOI:

https://doi.org/10.12660/rbfin.v11n3.2013.7434

Keywords:

Market Microstructure, Liquidity Components, Commonality in Liquidity, Stock Market

Abstract

The objective of this work is to study the intraday dynamics of liquidity in the Brazilian stock exchange from the perspective of co-movements (or commonalities). In the study we argue that this common factor in the liquidity of the stocks is affected by the intraday patterns related to microstructure effects in the market. Using a high frequency database, such a hypothesis is investigated for the Brazilian data and we report large evidence that the commonality effect in the liquidity changes significantly along different times of the day. During the first and last hours of trading this effect is more intense. We justify this result as an effect of the arrival of new information to the market and the existence of the overnight risk.

Author Biographies

Fernanda Gomes Victor, Universidade Federal do Rio Grande do Sul - UFRGS

Professora Assistente do Departamento de Ciências Contábeis e Atuariais (DCCA) da Universidade Federal do Rio Grande do Sul (UFRGS)

Marcelo Scherer Perlin, Universidade Federal do Rio Grande do Sul

Professor Adjunto, Escola de Administração – UFRGS (Porto Alegre, RS).

Mauro Mastella, Univesidade Estadual do Rio Grande do Sul

Doutorando em Finanças, Escola de Administração – UFRGS; Professor Assistente, Universidade Estadual do Rio Grande do Sul – UERGS (Porto Alegre, RS).

Published

11/21/2013