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HS300 index and margin interest. Figure 1 reports the movements of HS300 index and average margin interest in the Chinese stock markets between Sep 2014 and Dec 2018
Source publication
Using a sample of Chinese stocks, we demonstrate that liquidity and return in stocks with margin trading can spread to other stocks causing spillover effects. Furthermore, the level of margin interest has a positive relation with the degree of spillover effects from relevant stocks. In addition to the deleverage mechanism which has received support...
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We consider an automated market maker (AMM) in which all trades are batched and executed at a price equal to the marginal price (i.e., the price of an arbitrary small trade) after the batch trades. We show that such an AMM is a function maximizing AMM (or FM-AMM): for given prices, it trades to reach the highest possible value of a given function....
Citations
... In the foreign exchange domain, Chang et al. (2022) identify significant liquidity spillovers across currencies, noting that these spillovers are time-variant and are exacerbated by financial constraints and market instability. Recent studies by Zhou and Ye (2023) in the equity market reveal that liquidity and returns of margin-traded equities exert spillover effects on other stocks. Lim and Choi (2022) further corroborate that liquidity spillovers manifest be-tween different industry sectors within the equity market, as evidenced in an analysis of S&P 500 constituents. ...
This study delves into China’s carbon emissions trading markets, investigating the interplay between carbon price liquidity and stock liquidity. Focusing on 338 companies listed in the national and eight pilot markets of the carbon emissions trading system from August 2013 to October 2023, the empirical finding reveals a positive impact of carbon price liquidity on stock liquidity. Notably, this positive association manifests more robustly in industries characterized by low carbon intensity compared to those with high carbon intensity, is more prominent during the COVID-19 period than in preceding times, and is particularly accentuated in the Hubei Province and Chongqing, as opposed to the remaining seven regions. Intriguingly, both carbon price liquidity and stock liquidity display positive autocorrelations in vector autoregression analysis. The endogeneity concern is alleviated by the two-stage least squares regressions, using lagged carbon price liquidity as instrumental variables. This study contributes to an enhanced comprehension of the dynamic interaction between carbon price liquidity and stock liquidity contextualized within China’s evolving carbon market landscape. The insights garnered herein hold substantial value for investors and government stakeholders seeking to navigate this evolving financial terrain. AcknowledgmentThis research was supported by the Summer Student Partnering with Faculty Research Program of Wenzhou-Kean University (WKUSSPF202304), the Wenzhou Association for Science and Technology – Service and Technology Innovation Program (jczc0254), and the Department of Education of Zhejiang Province – General Program (Y202353438).
