The Peace Benefit: How a Country's Peacefulness Enhances Liquidity for Cross-listed Stocks

This study investigates the impact of country-level peacefulness on the liquidity of cross-listed stocks traded on the New York Stock Exchange (NYSE) from 2008 to 2019. Our empirical analysis reveals that stocks from more peaceful countries exhibit enhanced liquidity, characterized by narrower spreads and reduced information-based trading. Among the global peace index’s subindices, the safety and security measure shows the strongest and most consistent relationship with stock liquidity. We further explore the direct, indirect, and mediating effects of peace-related factors on market liquidity, employing change and instrumental variable regressions to validate our results. The findings remain robust, demonstrating that improvements in a country’s peacefulness can significantly boost the liquidity and market quality of its cross-listed stocks, offering key insights for investors and policymakers.