Illiquidity Contagion and Liquidity Crashes

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Giovanni Cespa ; Thierry Foucault (2014)
  • Journal: Review of Financial Studies, volume 27, issue 6, pages 1,615-1,660
  • 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... View more
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