Commonality in Returns, Order Flows, and Liquidity in the Greek Stock Market

European Journal of Finance, Vol. 17, pp. 577-587, 2011

WBS Finance Group Research Paper No. 161

Posted: 10 Jun 2011 Last revised: 26 Dec 2019

See all articles by Michael Moore

Michael Moore

University of Warwick - Warwick Business School

Vassilios G. Papavassiliou

University College Dublin (UCD) - Michael Smurfit Graduate School of Business; UCD Geary Institute for Public Policy; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Peter G. Dunne

Central Bank of Ireland

Date Written: June 3, 2011

Abstract

Using a unique high-frequency data set on a comprehensive sample of Greek blue-chip stocks, spanning from September 2003 through March 2006, this note assesses the extent and role of commonality in returns, order flows, and liquidity. It also formally models aggregate equity returns in terms of aggregate equity order flow, in an effort to clarify order flow’s importance in explaining returns for the Athens Exchange market. Almost a quarter of the daily returns in the FTSE/ATHEX20 index is explained by aggregate own-order flow. In a second step, using principal components and canonical correlation analysis, we document substantial common movements in returns, order flows, and liquidity, both on a market-wide basis as well as on an individual security basis. These results emphasize that asset pricing and liquidity cannot be analyzed in isolation from each other.

Keywords: Market Microstructure, Common Factors, Order Flow, Liquidity

JEL Classification: G10, G14, G15

Suggested Citation

Moore, Michael John and Papavassiliou, Vassilios G. and Dunne, Peter G., Commonality in Returns, Order Flows, and Liquidity in the Greek Stock Market (June 3, 2011). European Journal of Finance, Vol. 17, pp. 577-587, 2011, WBS Finance Group Research Paper No. 161, Available at SSRN: https://ssrn.com/abstract=1857576

Michael John Moore (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Vassilios G. Papavassiliou

University College Dublin (UCD) - Michael Smurfit Graduate School of Business ( email )

Blackrock, Co. Dublin
Ireland

UCD Geary Institute for Public Policy ( email )

University College Dublin
Belfield, Dublin Dublin 4
Ireland

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Peter G. Dunne

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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