Comovement, Liquidity and Asymmetries
Vol. 19, No. 1, 2021
James X. Xiong
Substantially increased institutional investing and index trading in the US stock market have a meaningful impact on the mechanical relationship between return comovement and liquidity, which can be quantiﬁed by a power-law function and explained by a liquidity supply model. Three well-documented asymmetries (asymmetric volume, asymmetry in non-market volatility, and positive skewness for individual stocks) are disappearing with increased basket trading, however, asymmetric correlation survives.