Commonality in Returns, Order Flows, and Liquidity in the Greek Stock Market
European Journal of Finance, Vol. 17, pp. 577-587, 2011
Posted: 10 Jun 2011 Last revised: 26 Dec 2019
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: Suggested Citation