The effects of uncertainty on market liquidity : evidence from Hurricane Sandy


Rehse, Dominik ; Riordan, Ryan ; Rottke, Nico ; Zietz, Joachim


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URL: https://ub-madoc.bib.uni-mannheim.de/46161
URN: urn:nbn:de:bsz:180-madoc-461619
Document Type: Working paper
Year of publication: 2018
The title of a journal, publication series: ZEW Discussion Papers
Volume: 18-024
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G12 , G14,
Keywords (English): Uncertainty , liquidity , financial crisis , natural experiment
Abstract: We test the effects of uncertainty on market liquidity using Hurricane Sandy as a natural experiment. Given the unprecedented strength, scale and nature of the storm, the potential damages of a landfall near the Greater New York area were unpredictable and therefore uncertain. Using a difference-in-differences setting, we compare the market reactions of Real Estate Investment Trusts (REITs) with and without properties in the widely-published evacuation zone of New York City prior to landfall. We find relatively less trading and wider bid-ask spreads in affected REITs. The results confirm theory on the detrimental effects of uncertainty on market functioning.

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Rehse, Dominik ; Riordan, Ryan ; Rottke, Nico ; Zietz, Joachim (2018) The effects of uncertainty on market liquidity : evidence from Hurricane Sandy. Open Access ZEW Discussion Papers Mannheim 18-024 [Working paper]
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