Cross-border banking flows are not priced into the cross-section of US stocks

But dealer risk appetite is.

In the past few days, we have documented some peculiar facts about the global financial cycle. We have seen that our measure of global liquidity, the flux of cross-border financial flows, predicts one quarter ahead dollar strength. We have seen that shocks to global liquidity are priced into the cross-section of national stock market returns. Most surpr…