Date of Award


Degree Type


Degree Name


Degree Program

Financial Economics


Economics and Finance

Major Professor

Mukherjee, Tarun; Wei, Peihwang Philip

Second Advisor


Third Advisor

Turunen-Red, Arja

Fourth Advisor

Whitney, Gerald


We identify some of the factors affecting the extent of commonality in liquidity and differences between different stock exchanges around the world. With a comprehensive approach, our investigation centers on presenting evidence on the existence of commonality in liquidity, effect of using different measures of market variables on the level of commonality, factors that change the likelihood of stocks having commonality and factors explaining the different levels of commonality across markets. For the individual stock liquidity, we employ most common and reliable liquidity measures including quoted bid and ask spread, proportional spread, effective spread, proportional effective spread and percentage spread. For the market liquidity, we calculate the equal weighted and value weighted averages of the individual stock liquidity measures. Our base model of commonality of liquidity is an extension of Chordia, Roll, and Subrahmanyam (2000). Our data includes 36,457 common stocks in 46 stock exchanges in 33 countries. Our data period begins on January 2000 and covers until the end of December 2007. Our results show that 14.38% of all stocks in the world have commonality in liquidity with their markets when equally weighted market variables are used. This percentage drops to 9.76% with using value weighted market variables. After controlling for commonality in certain days of the week, we find that commonality is, in most part, uniformly distributed across days-of-the-week, almost for all countries. We also find that market factors including average spread, average price, average return, average risk, average size, legal system (common vs. civil law) and distribution of mean company size affect the likelihood of companies having commonality within their exchanges. In terms of the different levels across countries, we find that average percentage spread, level of risk, distribution of mean company size and legal system all have significant effects. Our results contribute to the literature analyzing factors that affect the level of commonality and types of companies that are likely to have commonality. Our study also has practical implications for portfolio diversification by providing evidence for possible reasons for common liquidity movements in the markets which may eventually lead to market liquidity crunches.


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