Liquidity risk spillover: Evidence from cross-country analysis

We investigate the spillover of market liquidity risk across 50 countries using daily data from 1995 to 2010. By employing market liquidity risk measures from Pastor and Stambaugh (2003) and Acharya and Pedersen (2005), we estimate market liquidity risk associations among global stock markets. Empirical results show that the market liquidity risks across countries are correlated. Our study is important for governments, securities exchanges officials, institutional and individual investors.