Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102380
Authors: 
Poon, Ser-Huang
Rockinger, Michael
Stathopoulos, Konstantinos
Year of Publication: 
2011
Series/Report no.: 
Manchester Business School Working Paper 623
Abstract: 
During the financial crisis in 2007-8, the quoted spread for the average S&P 1500 firm increased by 50%, while the systematic liquidity risk increased by 34%. We find that the trading of a firm's equity by institutional investors increased the firms' quoted spreads, and led to a higher liquidity commonality during the crisis. Institutional sell-side herding contributed strongly to both effects. Our results are robust to different specifications and consistent with theoretical and anecdotal evidence regarding the role of herding during a crisis.
Subjects: 
Institutional Herding
Institutional Count
Institutional Holdings
Market Liquidity
Financial Crises
JEL: 
G01
G14
G20
Document Type: 
Working Paper

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