Book Description
We study the dynamics of liquidity around jumps by identifying their exact intraday timing and retrieve all macroeconomic and firm-specific news for the 30 constituents of the Dow Jones Industrial Average index. We match around a third of the jumps with macroeconomic news announcements, while five per cent of the jumps are associated with firm-specific news. Jumps are found to coincide with a significant increase in trading costs and demand for immediacy, amplified by the release of news. Liquidity supply remains nevertheless high and there is rather strong evidence of resilience. Liquidity shocks in the effective spread and the number of trades are the key drivers behind the occurrence of a jump. Compared with macroeconomic news, the arrival of firm-specific news increases the probability of a jump twice as much. Finally, order imbalance appears to be the most informative liquidity variable with respect to price discovery, especially after the arrival of news.