The rise of automated trading systems has made stock trading more accessible and convenient, reducing the link between traditional illiquidity measures and stock returns. However, empirical data in China’s stock market shows conflicting results. We find a significantly positive correlation between intraday illiquidity and future returns in China’s stock market. We offer that the pricing ability of this intraday illiquidity originates from the correlation between trading activity and intraday return. This finding provides compelling out-of-sample evidence for the debate regarding the pricing of the Amihud (2002) measure in the U.S. market. Additionally, we create an intradayreturn illiquidity factor that outperforms Liu, Stambaugh, and Yuan (2019) sentiment factors in China’s stock market.

In this paper, we show that only the systematic component of exchange rate expectations of professional investors is a strong predictor of the cross-section of currency returns. The predictability is strong in short and long horizons. The strategy offers significant Sharpe ratios for holding periods of 1 to 12 months, and it is unrelated to existing currency investment strategies, including risk-based currency momentum. The results hold for forecast horizons of 3, 12, and 24 months, and they are robust after accounting for transaction costs. The idiosyncratic component of currency expectations does not contain important information for the cross-section of currency returns. Our strategy is more significant for currencies with low sentiment and it is not driven by volatility and illiquidity. The results are robust when we extract the systematic component of the forecasts using a larger number of predictors.

To avoid illiquidity spillovers and basis risk in swaps, interbank lenders are especially cautious about whether interbank borrowers can meet their claims. We examine whether the incentive of interbank lenders to penalize risky borrowers can reduce borrowers' liquidity risk taking. We find that interbank borrowers, especially small and medium banks, manage their liquidity risks more prudently than their counterparts. This phenomenon is especially significant for borrowers with high information asymmetry, low liquidity buffers, and high funding gaps. Our results suggest that interbank exposure reduces the asset, funding, and off‐balance‐sheet liquidity risks of small and medium borrowing banks, and can therefore supplement regulatory liquidity requirements, which target only the largest banks.

Drifting in the direction of earnings surprises for a prolonged period is a decades-puzzling financial anomaly, i.e., the “post-earnings-announcement drift” (PEAD). This paper provided a new simple measure of earnings surprise called ORJ. Based on ORJ, not only is the medium effect of investors’ attention on the relationship between earnings surprises and PEAD analyzed, but a tractable and profitable investing strategy is provided. Through comprehensive empirical analysis of the Chinese stock market, we found that i) both earnings surprises and investor attention can increase the degree of PEAD; ii) “good” (bad) earnings surprises strengthen (weaken) the degree of drift by attracting (decreasing) investor attention; it is asymmetric that the positive effects of “good” earnings surprises are stronger than that of “bad” earnings surprises on PEAD; and iii) the strategy obtains an average 6.78% return per quarter in excess of the market and only longs dozens of stocks . iv) Typical pricing factors such as the Fama-French three factors, illiquidity and company characteristics have little explanatory power for the returns of the strategy. This paper strongly shows the importance of monitoring overnight returns of earnings announcements to digging the unexpected information, reveals one mechanism of earnings surprises on PEAD and demonstrates the potential profitability of PEAD in the Chinese market.

This work models the spillover of liquidity and volatility and their joint dynamics in the Chinese stock market. Methodologically, we implement a copula-based vector multiplicative error model for sectors. Utilizing intraday data from 2014 to 2022, our empirical analysis reveals strong interdependence between liquidity and volatility at the sectoral level. Moreover, different sectors dominate the transmission of liquidity and volatility shocks at different times. In normal times, sector volatilities transmit shocks notably (though not always dominantly), while in turbulent times, illiquidity is the key channel through which shocks spread. We also pay special attention to how two catastrophic events impacted the Chinese stock market: the 2015/16 stock market crash and the COVID-19 pandemic. Our ffndings are useful for policymakers monitoring and making policy at the sectoral level, as well as for institutional and private investors making investment decisions.

This study investigates and compares the effects of the Coronavirus Disease 2019 (COVID-19) pandemic, the Chicago Mercantile Exchange (CME)'s negative price suggestion on prices and trading activities in the crude oil futures market to discuss the cause of negative crude oil futures prices. Through event studies, our results show that the COVID-19 pandemic no longer impacts crude oil futures prices in April after controlled market risk, while the CME’s negative prices suggestion can explain the crude oil futures price changes around and around even after April 8 to some degree. Moreover, our study uncovers anomalies in prices and trading activities by analyzing returns, trading volume, open interest, and illiquidity measures using vector autoregressive (VAR) models. The results imply that CME’s allowing negative prices strengthens the price impact on trading volume and makes illiquidity risk matter. Our results coincide with the following lawsuit evidence of market manipulation.

This paper finds that Chinese stocks rise in February instead of January. Further analysis shows that the February premium is attributed to the Chinese New Year. We propose an alternative explanation for this premium based on liquidity preference, i.e., investors prefer holding liquid assets before the holiday and illiquid assets after the holiday. We find a substantial decrease in monetary base and increase in market activity after the Chinese New Year. The empirical fact that the Chinese New Year effect is particularly strong for stocks with low institutional holdings also supports this hypothesis.

We examine a unique one day lockup constraint in stock markets in China and contribute to the understanding of impact of non-marketability on asset prices. Buyers of Chinese stocks are subject to a one day lockup and cannot sell their shares until the next day, but warrant traders are free of such restrictions. We demonstrate that the lockup creates a price discount relative to stock value implied by warrants. We show that the discount decreases throughout the trading day and that investors tend to purchase stocks when the lockup becomes less binding. The paper provides implications to value illiquid assets.

We provide a model of hedge fund securing financing from a prime broker where deterioration in collateral value exacerbates counterparty risk and liquidity risk for the prime broker due to strategic actions of hedge funds. Costs of liquidity insurance and enforcing contracts determine hedge fund leverage. The model provides several new insights. First, it uncovers a new channel for funding liquidity that can explain why illiquid funds fare worse in times of stress and why better governed funds fared better during the financial crisis. Second, the model provides a new testable hypothesis that systematic or idiosyncratic shocks to fundamentals of bank holding companies may spillover to connected hedge funds through internal capital markets. It also offers an identification strategy to distinguish between possible competing hypotheses. Third, strong governance at hedge funds may reduce incentives to invest in profitable opportunities. Fourth, banking reforms such as Supplementary Leverage Ratio, Liquidity Coverage Ratio and Standing Repo Facility intended to improve resilience of banks may also make hedge funds less vulnerable to shocks in the banking sector. Fifth, the model offers a possible reconciliation for the mixed evidence on the impact of leverage on hedge fund survival documented in the literature.

从公司财务的视角探讨资产流动性对股票流动性的影响：一方面，资产的流动性越高，现有资产的不确定性就越低，因而股票的流动性越好；另一方面，高的资产流动性也会带来投资机会的增加，导致未来现金流的不确定性增大，从而降低股票的流动性。因此，理论上资产流动性与股票 流动性间存在不确定性。基于中国证券市场的结构特征，首先从理论上探讨了资产流动性与股票流动性间的相关性及其作用机理，以及不确定性的产生根源；其次，以A 股上市公司为样本，实证分析了资产流动性与股票流动性间的相关性。结果表明，在我国证券市场中股票流动性与资产流动性显著正相关，资产的流动性越高，股票的流动性也越好。进一步，小规模、低成长型和融资受限的公司，二者间的正相关性更强。研究结果对正确评价企业投融资决策、资产定价和股票的流动性、流动性风险均具有一定的参考价值。