Date of Award
Master of Science (MS)
Economics and Finance
Using a VECM to estimate the dynamics of liquidity, in this case bid-ask spread, I run simulations for stocks of varying market capitalizations and find that lower market cap stocks require more orders to return to equilibrium spread following a shock, suggesting less efficiency of price discovery in lower cap stocks. Despite the greater number of order necessary for lower cap stocks, the return to equilibrium spread is still very fast, suggesting a relatively efficient market for NYSE and NASDAQ stocks in the upper three market cap quartiles.
Burton, Nathan, "The Efficiency of Liquidity Resiliency" (2017). All Graduate Plan B and other Reports. 1020.
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