This paper provides a compact framework for banking regulation analysis in the presence of uncertainty between systemic liquidity and solvency shocks. It explains the asset price anomalies and bank lending freeze during the crisis. The paper shows how the coexistence of illiquidity and...

Is the effect of liquidity risk on asset prices sensitive to our choice of liquidity proxy? In addressing this fundamental question, we achieve two main results. First, when we estimate factor models on a broad range of liquidity measures we uncover a profound distinction between trade and order...

Does liquidity risk differ depending on our choice of liquidity proxy? Unlike literature that considers common liquidity variation, we focus on identifying different components of liquidity, statistically and economically, using more than a decade of US transaction data. We identify three main...