Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums
首次系统研究外汇市场流动性，发现汇率间流动性差异大、成本高，且流动性在货币间及与股债市场存在共同性；流动性风险对套利交易回报有显著影响，尤其在2007-2009年。
ABSTRACT We provide the first systematic study of liquidity in the foreign exchange market. We find significant variation in liquidity across exchange rates, substantial illiquidity costs, and strong commonality in liquidity across currencies and with equity and bond markets. Analyzing the impact of liquidity risk on carry trades, we show that funding (investment) currencies offer insurance against (exposure to) liquidity risk. A liquidity risk factor has a strong impact on carry trade returns from 2007 to 2009, suggesting that liquidity risk is priced. We present evidence that liquidity spirals may trigger these findings.