Illiquidity Contagion and Liquidity Crashes
Article
OPEN
Giovanni Cespa
;
Thierry Foucault
(2014)
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Journal:
Review of Financial Studies,
volume
27,
issue
6,
pages
1,615-1,660
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Related identifiers:
doi: 10.1093/rfs/hhu016
Liquidity providers often learn information about an asset from prices of other assets. We show that this generates a self-reinforcing positive relationship between price informativeness and liquidity. This relationship causes liquidity spillovers and is a source of fra...
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