Market Liquidity Drop Linked to Excessive Risk Could Impact Returns.
The study looked at how liquidity affects asset prices. They found that when liquidity risk increases, market returns drop suddenly. The size of this drop depends on the type of assets being traded. If large-scale assets are used as a benchmark, market returns drop significantly when liquidity is low. But if small-scale assets are used, market returns stay more stable. This shows that liquidity and market structure are crucial for controlling and regulating monetary policy.