Journal of Banking & Finance Vol. 36 No. 9 2012
Funding liquidity and equity liquidity in the subprime crisis period: Evidence from the ETF market
Abstract
Using index and financial exchange-traded funds (ETFs), this study explores the relation between funding liquidity and equity liquidity during the subprime crisis period. Our empirical results show that a higher degree of funding illiquidity leads to an increase in bid–ask spread and a reduction in both market depth and net buying imbalance. Such findings indicate that an increase in funding liquidity can improve equity liquidity, with a stronger effect for the financial ETFs than for the index ETFs. Our study provides a better overall understanding of the effect of the liquidity–supplier funding constraint during the subprime crisis period.
- DOI
- 10.1016/j.jbankfin.2012.06.003
- Volume
- 36
- Issue
- 9
- Pages
- 2660-2671
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib