Arbeitspapier
Correlated liquidity shocks, financial contagion and asset price dynamics
Recent literature shows how the destabilising effect of portfolio insurance activity on the price of the underlying asset depends on the liquidity of the asset market. We build a simple model where market timers shift capital around asset markets in order to exploit gains from temporary excess-volatility of asset prices. In this way, market timers increase the liquidity of asset markets reducing the excess volatility, while they increase the cross-market correlation, whereas long-ranged …nancial contagion eventually occurs. We show how liquidity of asset markets, cross-market correlation and excess volatility of asset prices depend on structural parameters of asset markets.
- Language
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Englisch
- Bibliographic citation
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Series: Quaderni - Working Paper DSE ; No. 448
- Classification
-
Wirtschaft
- Event
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Geistige Schöpfung
- (who)
-
Andergassen, Rainer
- Event
-
Veröffentlichung
- (who)
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Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
- (where)
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Bologna
- (when)
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2002
- DOI
-
doi:10.6092/unibo/amsacta/4848
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Andergassen, Rainer
- Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE)
Time of origin
- 2002
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