An examination of commonality in liquidity: New evidence from the Australian stock exchange

Given a background of relatively weak findings documented in previous Australian work, the current study aims to provide new robust evidence of commonality in liquidity (CL) in this pure order driven market and some rationales regarding unexplained empirical findings. We also extend the methodology employed by previous studies in several ways. In so doing, we employ an enhanced research design, new liquidity proxies and an extended sample period. Apart from conventional measures of systematic liquidity, we also investigate potential non-linearities employing a simple 'up' and 'down' market setup, as well as a quadratic CL specification. Generally, we document a richer set of positive findings regarding the existence of CL in this order driven market setting.