Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144456
Authors: 
Boudt, Kris
Paulus, Ellen C.S.
Rosenthal, Dale W.R.
Year of Publication: 
2013
Series/Report no.: 
Working Paper Research 244
Abstract: 
We investigate the effect of market liquidity on equity-collateralized funding accounting for endogeneity. Theory suggests market liquidity can affect funding liquidity in stabilizing and destabilizing manners. Using the average fee on stock loans as a proxy for equity-collateralized funding liquidity, we confirm the existence of these two regimes over the period of July 2006 – May 2011. Furthermore, we show that we can separate the two regimes using the yield spread of Eurodollars over T-bills (TED spread) and that a regime switch seems to occur near a TED spread of 48 basis points.
Subjects: 
equity-collateralized funding liquidity
market liquidity
two-regime model
financial distress
JEL: 
G01
G18
Document Type: 
Working Paper

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