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The influence of oil price uncertainty on stock liquidity
Author(s) -
Zhang Qin,
Wong Jin Boon
Publication year - 2023
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22383
Subject(s) - market liquidity , oil price , stock (firearms) , monetary economics , financial economics , economics , stock price , stock market , market maker , business , econometrics , bid–ask spread , mechanical engineering , paleontology , horse , series (stratigraphy) , biology , engineering
Using high‐frequency intraday data, this study provides strong empirical evidence that elevated oil price uncertainty has a significant and negative influence on stock liquidity. More specifically, the results suggest that large oil‐related corporations are most affected, followed by small‐listed firms more generally. Further analysis reveals that liquidity providers widen the bid‐ask spreads to protect themselves during periods of high oil price uncertainty for large‐listed firms, particularly those in the oil industry. These findings are robust to various measures of oil price uncertainty, different market conditions, structural break analysis and show the influence of oil price movements extends to stock liquidity.