Contagious Margin Calls: How COVID-19 Threatened Global Stock Market Liquidity

Field	Value	Language
dc.contributor.author	Foley, Sean	en
dc.contributor.author	Kwan, Amy	en
dc.contributor.author	Philip, Richard	en
dc.contributor.author	Ødegaard, Bernt Arne	en
dc.date.accessioned	2020-07-27
dc.date.available	2020-07-27
dc.date.issued	2020	en
dc.identifier.uri	https://hdl.handle.net/2123/22952
dc.description.abstract	The COVID-19 epidemic has caused some of the largest - and fastest - market dislocations in modern history. Contemporaneous with the significant fall in equity market values is the evaporation of market liquidity. We document the evolution of transactions costs, depth and rewards to liquidity suppliers across a variety of countries affected by the virus. We show that transactions costs increase sharply in a coordinated fashion across global markets, with depth drying up almost overnight. The withdrawal of global liquidity suppliers is correlated with the increase of over 400% in margin requirements, driving a pro-cyclical downwards liquidity spiral. These affects are shown to be concentrated in securities most exposed to electronic market-makers.	en
dc.language.iso	en	en
dc.rights	Other	en
dc.subject	COVID-19	en
dc.subject	Coronavirus	en
dc.title	Contagious Margin Calls: How COVID-19 Threatened Global Stock Market Liquidity	en
dc.type	Preprint	en
dc.identifier.doi	10.2139/ssrn.3646431
usyd.faculty	The University of Sydney Business School

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