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ABDC-B
Musunuru Praveena and Mohammad Shameem Jawed
Title: : COVID-19, Stock Liquidity, and Abnormal Returns
Journal: Review of Pacific Basin Financial Markets and Policies
This paper examines the relationship between
ex-ante stock liquidity and abnormal returns
during various phases of COVID-19 led
market uncertainties in India. We find that the
volume-based liquidity supports stock more
significantly during the crisis than in periods of
calm. However, contrary to existing empirical
evidence, price-based liquidity penalizes stocks during a crisis. Moreover, during periods of calm and recovery, the
inverse relationship of liquidity-abnormal return reverses. Further analysis shows that this change of price-based
liquidity to abnormal return relationship is more prominent in firms with higher ex-ante liquidity. In contrast, highly
illiquid firms appear immune.
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