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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Money and liquidity in financial markets
Organization Unit
Authors
  • Kjell G. Nyborg
  • Per Nils Anders Östberg
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Journal of Financial Economics
Publisher Elsevier
Geographical Reach international
ISSN 0304-405X
Volume 112
Number 1
Page Range 30 - 52
Date 2014
Abstract Text We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the market for liquidity leads banks to engage in what we term “liquidity pull-back,” which involves selling financial assets either by banks directly or by levered investors. Empirical tests on the stock market are supportive. Tighter interbank markets are associated with relatively more volume in more liquid stocks; selling pressure, especially in more liquid stocks; and transitory negative returns. We control for market-wide uncertainty and in the process also contribute to the literature on portfolio rebalancing. Our general point is that money matters in financial markets.
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Official URL http://www.sciencedirect.com/science/article/pii/S0304405X13003036
Related URLs
Digital Object Identifier 10.1016/j.jfineco.2013.12.003
Other Identification Number merlin-id:9280
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