We study market liquidity via daily close relative spreads and daily traded volumes in a sample of 426 Samp;P500 constituents recorded over the years 2004-2006, a period of quot;normalquot; liquidity conditions. We use recent results on the Generalized Dynamic Factor Model (GDFM) with block...

This paper evaluates the impact of co-movement in equity return correlations on the equity risk-return trade-off. By applying a principal components analysis on conditional correlations, conditional covariances between the return of a security and the market return are decomposed in a sum of...

I propose a simple econometric model to capture the interaction between commonness and idiosyncrasy in returns on sovereign bonds of Eurozone countries. Common contagion is defined as the impact of yesterday's idiosyncratic shocks on today's common factor. When assuming returns are driven by one...