Publication Type

Journal Article

Version

Postprint

Publication Date

10-2015

Abstract

This study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.

Keywords

Market segmentation, liquidity, local bias, local business cycles, capital constraints, institutional investors, return predictability

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial and Quantitative Analysis

Volume

50

Issue

5

First Page

987

Last Page

1010

ISSN

0022-1090

Identifier

10.1017/S0022109015000447

Publisher

Cambridge University Press

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1017/S0022109015000447

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