Dynamic Autoregressive Liquidity (DArLIQ) and Dynamic Event Studies
We develop a dynamic framework to detect the occurrence of permanent and transitory breaks in the illiquidity process. We propose various tests that can be applied separately to individual events and can be aggregated across different events over time for a given firm or across different firms. We use this methodology to study the impact of forward and reverse stock splits on the illiquidity dynamics of the S&P 500, S&P 400 and S&P 600 index stock constituents. Our empirical results show that stock splits have a positive and significant effect on the permanent component of the illiquidity process while a majority of the stocks engaging in reverse splits experience an improvement in liquidity conditions.
Date: 31 January 2025, 14:15
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room C
Speaker: Oliver Linton (University of Cambridge)
Organising department: Department of Economics
Part of: Nuffield Econometrics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Edward Clark