The liquidity of energy stocks

Konstantinos Sklavos, Lammertjan Dam, Bert Scholtens*

*Corresponding author for this work

    Research output: Contribution to journalArticleAcademicpeer-review

    8 Citations (Scopus)

    Abstract

    This study investigates the dynamics of stock market liquidity in the energy industry in the US for 130 firms for the period 2006-2011. We use a (structural) vector autoregression approach to model the simultaneous relationships between three liquidity measures, namely turnover, price impact and spread. In addition, we account for oil prices in this model. The liquidity measures exhibit a persistent (highly autocorrelated) pattern. The intensity of trading appears to be relevant for the interrelationships of the liquidity measures. Stocks that are traded more often seem to be less sensitive to changes in liquidity. The main contribution of this study is that we introduce and test a specific causality pattern between trading activity, price impact, and spreads of energy stocks. This causality pattern is stronger during illiquid periods, which makes these periods much more risky. (C) 2013 Elsevier B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)168-175
    Number of pages8
    JournalEnergy Economics
    Volume38
    DOIs
    Publication statusPublished - Jul-2013

    Keywords

    • Liquidity
    • Energy stocks
    • Oil returns
    • US
    • BID-ASK SPREAD
    • SECURITIES MARKETS
    • EMPIRICAL-ANALYSIS
    • OIL
    • PRICE
    • COMMONALITY
    • INFORMATION
    • VOLATILITY
    • RISK
    • DERIVATIVES

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