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Analysis of the dynamic relationship between liquidity proxies and returns on the French CAC 40 index

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Abstract

The aim of this paper is to analyze the dynamic evolution of six liquidity proxies on time and to find their causality with the French CAC 40 stock market index returns, over the period from January 2007 to December 2018. To this end, we use a vector autoregressive approach and the impulse response function and we perform the Granger causality test between the CAC 40 index returns and six different liquidity proxies. Empirical results suggest a significant short-term relationship between the returns and the liquidity. As for causality test, the results reveal that there is unidirectional causality running from returns to liquidity.

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Data availability statement

Manuscript contains data which will be made available on a reasonable request.

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Authors and Affiliations

  1. MRE-Montpellier Recherche en Economie, UM-Université de Montpellier, Montpellier, France

    Ayad Assoil & Jules Sadefo-Kamdem

  2. Université Alioune Diop de Bambey, Bambey, Senegal

    Ndéné Ka

Authors
  1. Ayad Assoil
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  2. Ndéné Ka
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  3. Jules Sadefo-Kamdem
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Correspondence to Ndéné Ka.

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Assoil, A., Ka, N. & Sadefo-Kamdem, J. Analysis of the dynamic relationship between liquidity proxies and returns on the French CAC 40 index. SN Bus Econ 1, 129 (2021). https://doi.org/10.1007/s43546-021-00129-7

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