Intraday liquidity dynamics of the DJIA stocks around price jumps

We study the intraday dynamics of liquidity around price jumps using trades and quotes data sampled at the 2-minute frequency for the 30 stocks in the Dow Jones Industrial Average (DJIA). Based on an original event-type methodology, we shed new light on the debate about the liquidity response by market participants to information arrivals. We show that the relationship between jumps and market liquidity depends on the respective dimensions of liquidity. First, the increase in ex-ante and ex-post trading costs is statistically significant but the economic impact remains limited. Second, jumps are driven by a sharp rise in the demand for immediacy, rather than by weak liquidity supply. As such, jumps do not seem to be due to an endogenous deficient provision of market liquidity. Third, there is rather strong evidence of resilience, whatever the liquidity measures under consideration