The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy

Rehse, Dominik; Riordan, Ryan; Rottke, Nico und Zietz, Joachim (November 2019): The effects of uncertainty on market liquidity: Evidence from Hurricane Sandy. In: Journal of Financial Economics, Bd. 134, Nr. 2: S. 318-332

Abstract

We test the effects of uncertainty on market liquidity using Hurricane Sandy as a natural experiment. Given the unprecedented strength, scale, and nature of the storm, the potential damages of a landfall near the Greater New York area were unpredictable and therefore uncertain. Using a difference-in-differences setting, we compare the market reactions of Real Estate Investment Trusts (REITs) with and without properties in the widely published evacuation zone of New York City prior to landfall. We find relatively less trading and wider bid-ask spreads in affected REITs. The results confirm theory on the detrimental effects of uncertainty on market functioning.

• Dokumententyp: Zeitschriftenartikel
• Keywords: Uncertainty, Liquidity, Financial crisis, Natural experiment
• Fakultät: Betriebswirtschaft > Institut für Financial Innovation and Technology
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• ISSN: 0304-405X
• Sprache: Englisch