This paper analyses the purchase and redemption behaviour of mutual fund investors and its implications on fund liquidity risk. We collect a novel set of proprietary data which contains a large number of French investors holding funds with various degrees of asset liquidity. We build a...

This paper proposes a new dynamic approach to modelling intra-day trading volume based on factor models. It assumes that intra-day volume can be decomposed into two parts each predicted using separate time-series models. By enabling more accurate prediction of intra-day volume, this methodology...

High frequency transaction prices exhibit two major cha racteristics: they are discrete in level and only exist at random transaction dates. In this paper, we seek to model transaction price dynamics, taking into account these two features. We specify the transaction price process as a Markov...

Until recently the liquidity of financial assets has typically been viewed as a second-order consideration. Liquidity was frequently associated with simple transaction costs that impose - temporary if any- effect on asset prices, and whose shocks could be easily diversified away. Yet the...

ETFs and index funds have grown at very rapid rates in recent years. Originally launched to track some large liquid indices in developed markets, they now also concern less liquid asset classes such as emerging market bonds. Illiquidity certainly affects the quality of the replication, and in...

Financial markets are today so interconnected that they are fragile to contagion. Massive investment funds with very short horizons in -and out- flows can generate contagion effects between markets. Since 2010, investors are willing to get a liquid exposure to the EM sovereign debt. As a...

In a new environment where liquidity providers as well as liquidity consumers act strategically, understanding how liquidity flows and dries-up is key. In this paper, we propose a dynamic extension of the seminal model of Tauchen and Pitts (1983)' Mixture of Distributions Hypothesis (MDH) that...

Based on the concept that the presence of liquidity frictions can increase the daily traded volume, we develop an extended version of the mixture of distribution hypothesis model (MDH) along the lines of Tauchen and Pitts (1983) to measure the liquidity portion of volume. Our approach relies on...