The asymmetric impact of funding liquidity risk on the volatility of stock portfolios during the covid-19 crisis

Baris Kocaarslan, Ugur Soytas*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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Abstract

In this study, we identify economic transmission channels through which changes in funding liquidity conditions in interbank markets asymmetrically affect volatilities of stock portfolios during the COVID-19 crisis. For the purpose of this study, the quantile regression approach is uti-lized. Controlling for macroeconomic factors, we document that volatilities of high-risk portfolios increase more in response to a deterioration in funding liquidity conditions compared to less risky portfolios. More importantly, this increase intensifies in high-volatility periods of high-risk portfo-lios, which implies the impact is stronger during uncertain economic environments, such as the one caused by the COVID-19 outbreak.
Original languageEnglish
Article number2286
JournalSustainability (Switzerland)
Volume13
Issue number4
ISSN2071-1050
DOIs
Publication statusPublished - 2021

Keywords

  • Funding liquidity
  • Volatility
  • Asymmetric relationship
  • COVID-19
  • Quantile regression

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