Commonality in liquidity: Effects of monetary policy and macroeconomic announcements

After the recent financial crisis, few issues receive more attention than central banks' actions or major macroeconomic announcements in markets. Motivated by this fact, we investigate the impact of specific macro-announcements on liquidity commonality in Turkey. Using a weighted spread constructed by a proprietary database of order flows, we reveal that among several developed countries, only U.S. monetary policy and macroeconomic announcements raise commonality in liquidity. Moreover, commonality is significantly affected (increased) only beyond the best price quotes, showing that researchers may obtain misleading results on commonality if they consider spread at the best price levels as a liquidity proxy.