We provide a simple theoretical analysis based on Kyle's (1985) framework, and demonstrate how stock price synchronicity can affect the adverse information risk that market makers face and therefore the liquidity of the stock. Our empirical evidence is consistent with our theoretical conjecture....

We argue and provide evidence that stock price synchronicity affects stock liquidity. Under the relative synchronicity hypothesis, higher return co-movement (i.e., higher systematic volatility relative to total volatility) improves liquidity. Under the absolute synchronicity hypothesis, stocks...

Consistent with recent theoretical models where binding capital constraints lead to sudden liquidity dry-ups, we find that negative market returns decrease stock liquidity, especially for high volatility stocks and during times of tightness in the funding market. The asymmetric effect of changes...

Examining the illiquidity premium in stock markets across 45 countries, we find the following. First, the average illiquidity return premium across countries is positive and significant, after controlling for other pricing factors. The premium is measured by monthly return series on...

Consistent with recent theoretical models where binding capital constraints lead to sudden liquidity dry-ups, we find that negative market returns decrease stock liquidity, especially during times of tightness in the funding market. The asymmetric effect of changes in aggregate asset values on...