Liquidity, Efficiency and the 2007-2008 Global Financial Crisis
We focus on the relationship between liquidity and market efficiency, and investigate the behavior of three stock market indexes (S&P500, Nasdaq and DAX) before, during and after the global financial crisis. We find that, once accounted for the scale, the two attributes are strongly related and empirical evidence is provided that, when market efficiency is measured through the pointwise regularity of the price, it is a better forecaster of illiquidity than vice versa.