Stock price synchronicity and liquidity

► We test for the “relative synchronicity” hypothesis and “absolute synchronicity” hypothesis and an increase in systematic volatility or market beta improves stock liquidity. ► We conduct empirical analysis based on a sample of NYSE stocks from 1989 to 2008. ► We construct liquidity measures using proportional effective bid-ask spread, Kyle's price impact measure and Amihud's illiquidity measure. ► Stock return co-movement has a negative relationship with the liquidity measures. ► For firms being added to the S&P 500 index, the improvement of the liquidity could be attributed to the increase in co-movement with the market.