Article
Liquidity Commonality and Spillover in the U.S. and Japanese Markets: An Intraday Analysis Using the Exchange-traded Funds
Review of Quantitative Finance and Accounting
(2008)
Abstract
This article examines the intraday returns and liquidity patterns of the Standard & Poor’s Depositary Receipts (SPY) and the iShares Morgan Stanley Capital International Inc. (MSCI) Japan Index Fund (EWJ). These exchange-traded funds seemingly have very different holdings, namely, US stocks and Japanese stocks. Our findings suggest that some commonality exists in the returns and liquidity of these apparently different assets. First, there are intraday, daily and monthly patterns in the measures of liquidity for both funds. Second, the measures of liquidity are correlated across these two assets. Third, there is evidence of intraday spillover in the mean, volatility and depth from the SPY to the EWJ, but daily spillover is not observed. Our study extends two evolving strands of the literature: the integration of world markets in terms of returns behavior, and the other strand suggests that liquidity may have a systematic, or market-wide, component. This paper provides direct evidence of the integration between the US and Japanese markets because contemporaneous trading prices for the US (SPY) and Japanese (EWJ) indices are employed.
Keywords
- exchange traded funds,
- commonality,
- intraday liquidity
Disciplines
Publication Date
2008
DOI
10.1007/S11156-008-0084-9
Citation Information
Yiuman Tse, Vinay Datar and Raymond W. So. "Liquidity Commonality and Spillover in the U.S. and Japanese Markets: An Intraday Analysis Using the Exchange-traded Funds" Review of Quantitative Finance and Accounting Vol. 31 (2008) p. 379 - 393 Available at: http://works.bepress.com/yiuman-tse/51/