Contagious margin calls: How COVID-19 threatened global stock market liquidity()

The outbreak of the COVID-19 pandemic caused some of the largest – and fastest – market dislocations in modern history. During the outbreak, liquidity quickly evaporated in a coordinated fashion across global markets. We show that a sudden increase in margin requirements during the pandemic is corre...

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Detalles Bibliográficos
Autores principales: Foley, Sean, Kwan, Amy, Philip, Richard, Ødegaard, Bernt Arne
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier B.V. 2022
Materias:
Article
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8556731/
http://dx.doi.org/10.1016/j.finmar.2021.100689
Descripción
Sumario:The outbreak of the COVID-19 pandemic caused some of the largest – and fastest – market dislocations in modern history. During the outbreak, liquidity quickly evaporated in a coordinated fashion across global markets. We show that a sudden increase in margin requirements during the pandemic is correlated with the withdrawal of global liquidity providers. These effects are concentrated in securities most exposed to high-frequency market makers, consistent with the binding nature of increased capital constraints.

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