The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy
By Dominik Rehse, Ryan Riordan, Nico B. Rottke, J. Zietz. Journal of Financial Economics, 2019
110 citations recorded by the source corpus.
We test the effects of uncertainty on market liquidity using Hurricane Sandy as a natural experiment. Given the unprecedented strength, scale and nature of the storm, the potential damages of a landfall near the Greater New York area were unpredictable and therefore uncertain. Using a difference-in-differences setting, we compare the market reactions of Real Estate Investment Trusts (REITs) with and without properties in the widely-published evacuation zone of New York City prior to landfall. We find relatively less trading and wider bid-ask spreads in affected REITs. The results confirm theory on the detrimental effects of uncertainty on market functioning.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/ff078fbd3fa11b7228efab2f5e75022132baf608
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Citations in the corpus
- Carbon risk and corporate capital structure (2020, unknown): “Similarly, Rehse et al. (2019) examine the Hurricane Sandy-induced landfall on the affected firms’ market liquidity.”
- Flatten the Curve and Stock Market Liquidity – An Inquiry into Emerging Economies (2020, result): “This is in-line with works of Rehse et al. (2019), Easley and O’Hara (2010), Ozsoylev and Werner (2011) and Routledge and Zin (2009), which conclude an increase in spreads thus illiquidity in the face of economics and financial uncertainty.”