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 fragility: a small drop in...

There is a large body of literature stressing the importance of developing financial markets, including stock markets, to enhance countries' growth. I argue that the relationship between stock markets and growth is exaggerated and that the simple act of opening a formal stock market is not a...