COVID-19 and the liquidity network

We investigate the impact of the COVID-19 pandemic on liquidity interlinkages of US industry groups. We employ a lead-lag liquidity network method that allows us to analyse liquidity interrelationships beyond contemporaneous spillover effects. We document that sectors differ in their liquidity interactions during the pre-COVID period, with some sectors more interlinked than others. We also document that the crisis induced by COVID had a significant effect on the liquidity network, with all sectors becoming more interconnected relative to the pre-COVID period. The effect varies across industries, with the utilities sector being the most affected, and telecommunication services the least.