Liquidity and volatility commonality in the Canadian stock market

Mathematics-in-Industry Case Studies

Table 7 Market-wide commonality in liquidity for TSX60 market capitalisation weighted

	SPR	PSPR	DEP	ESPR	PESPR
Panel A: Concurrent market term commonality
Coeff. mean	0.371	0.685	1.226	1.641	1.523
Coeff. st. dev.	0.289	0.547	1.207	4.440	4.141
% positive	98.15	100	100	100	100
% significant	94.44	94.44	98.04	26.00	28.00
Panel B: Concurrent and lagged market term commonality
Concurrent
Coeff. mean	0.406	0.736	1.225	1.641	1.523
Coeff. st. dev.	0.322	0.598	1.203	4.440	4.141
% positive	98.15	100	100	100	100
% significant	94.44	94.44	98.08	26.00	28.00
Lag
Coeff. mean	0.094	0.141	-0.015	0.009	0.004
Coeff. st. dev.	0.109	0.0165	0.050	0.026	0.013
% positive	87.04	88.89	40.74	60.00	58.18
% significant	66.67	70.37	3.70	0	0
Panel C: Concurent, lagged, and lead market term commonality
Concurrent
Coeff. mean	0.424	0.767	1.232	1.641	2.136
Coeff. st. dev.	0.334	0.623	1.216	4.441	5.868
% positive	98.15	100	100	100	100
% significant	94.44	94.44	98.04	26.00	28.00
Lag
Coeff. mean	0.104	0.159	-0.013	0.009	0.011
Coeff. st. dev.	0.111	0.175	0.047	0.026	0.029
% positive	90.74	88.89	40.74	63.63	65.45
% significant	68.52	72.22	3.70	0	0
Lead
Coeff. mean	0.041	0.071	0.072	0.009	0.009
Coeff. st. dev.	0.068	0.0100	0.154	0.018	0.179
% positive	88.33	87.04	44.44	69.09	69.09
% significant	18.52	35.19	27.78	0	0

Time series regression of daily proportional changes of individual stocks liqudity measures on daily proportional changes in market capitalisation weighted average liquidity for all stocks in the TSX60. SPR is the quoted spread, PSPR is the proportional spread, DEP is the depth, ESPR is the effective spread, and PESPR is the proportional effective spread. Daily percentage changes represent proportional changes in each liquidity metric across trading days, e.g. for liquidity measure L, the daily change is Δ L _t=(L _t−L _t−1)/L _t−1. For each individual regression, the TSX60 average does not include the dependent stock’s liquidity measures. Panel A denotes the cross-sectional averages of the regression only with the concurrent market liquidity measure, Panel B contains the cross-sectional average coefficients of the regression with the concurrent market liquidity variable and a lag term, and Panel C contains the cross-sectional average of the regression with the concurrent market liquidity variable, and lead and lag market term. Concurrent, Lag, and Lead denote, respectively, to the same, previous, and next trading day observations of the market liquidity variables. %-positive denotes the percentage of positive regression coefficients, and %-significant denotes the percentage of t-statistics greater than the 5% critical level in a one tailed test (+ 1.645). 60 stocks, years 2011–2014