Abstract
This study explores the commonality in liquidity for Saudi equities by using data from 105 shares covering the period January 2008 to December 2014. Our market model regression results present evidence a strong commonality in liquidity on the Tadawul stock market. In addition, we show the existence of significant commonality in liquidity over time during normal conditions. Furthermore, this study documents also that the liquidity commonality in the Saudi stock market is stronger in boom/bust stock market conditions than in boom/bust oil market conditions. Then, our time series analysis finds that commonality in liquidity is important across all size-based quartiles. Under the boom/bust stock market condition, the first quartile for firms with a small market capitalization is the most susceptible to liquidity commonality, while the last quartile, regrouping the firms with a large market capitalization, is the least sensitive to commonality in liquidity. However, under boom/bust oil market conditions, the small market capitalization quartile is, in general, least susceptible to market-wide liquidity, while the second quartile is more sensitive to liquidity commonality. (C) 2017 The Authors. Published by IASE.