Foreign institutions and the behavior of liquidity following macroeconomic announcements

Doojin Ryu; Robert I. Webb; Jinyoung Yu

doi:10.1016/j.frl.2022.103239

Foreign institutions and the behavior of liquidity following macroeconomic announcements

Doojin Ryu, Robert I. Webb, Jinyoung Yu^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

9 Citations (Scopus)

Abstract

This study uses a transaction-level dataset from the index futures market to investigate whether changes in the active participation ratio of foreign institutions explain the behavior of market liquidity following scheduled macroeconomic announcements. This ratio is positively associated with the bid-ask spread in general, but its marginal effect diminishes as the ratio increases. Announcement impacts vanish after controlling for the active participation of foreign investors.

Original language	English
Article number	103239
Journal	Finance Research Letters
Volume	50
DOIs	https://doi.org/10.1016/j.frl.2022.103239
Publication status	Published - Dec 2022
Externally published	Yes

Keywords

Bid-ask spread
Foreign institution
Macroeconomic announcement
Market liquidity

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10.1016/j.frl.2022.103239

Cite this

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title = "Foreign institutions and the behavior of liquidity following macroeconomic announcements",

abstract = "This study uses a transaction-level dataset from the index futures market to investigate whether changes in the active participation ratio of foreign institutions explain the behavior of market liquidity following scheduled macroeconomic announcements. This ratio is positively associated with the bid-ask spread in general, but its marginal effect diminishes as the ratio increases. Announcement impacts vanish after controlling for the active participation of foreign investors.",

keywords = "Bid-ask spread, Foreign institution, Macroeconomic announcement, Market liquidity",

author = "Doojin Ryu and Webb, {Robert I.} and Jinyoung Yu",

note = "Publisher Copyright: {\textcopyright} 2022",

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AU - Webb, Robert I.

AU - Yu, Jinyoung

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N2 - This study uses a transaction-level dataset from the index futures market to investigate whether changes in the active participation ratio of foreign institutions explain the behavior of market liquidity following scheduled macroeconomic announcements. This ratio is positively associated with the bid-ask spread in general, but its marginal effect diminishes as the ratio increases. Announcement impacts vanish after controlling for the active participation of foreign investors.

AB - This study uses a transaction-level dataset from the index futures market to investigate whether changes in the active participation ratio of foreign institutions explain the behavior of market liquidity following scheduled macroeconomic announcements. This ratio is positively associated with the bid-ask spread in general, but its marginal effect diminishes as the ratio increases. Announcement impacts vanish after controlling for the active participation of foreign investors.

KW - Bid-ask spread

KW - Foreign institution

KW - Macroeconomic announcement

KW - Market liquidity

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DO - 10.1016/j.frl.2022.103239

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JO - Finance Research Letters

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Foreign institutions and the behavior of liquidity following macroeconomic announcements

Abstract

Keywords

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