Purpose This study aims to revisit the existence of liquidity spillover effects between the US and European stock markets and investigates their dual-role structures. It examines which markets act as shock sources or absorbers or simultaneously assume both roles. Design/methodology/approach We employ entropy transfer to identify markets' roles. Additionally, a new multidimensional liquidity index is the primary variable in cross-market spillover analysis. Findings Evidence shows that the US is both a source of shocks and a major absorber for the Austrian, Belgian, Swiss, Polish and Portuguese markets, alternately acting as both an absorber and a source of shocks, thereby confirming the hypothesis that the US plays a dual role in this transmission network. Research limitations/implications The dataset is limited to the US and 10 European countries. Expanding to include emerging markets in Asia or Latin America would improve generalizability. More critically, the divergence between Shannon and Rényi entropy suggests potential further exploration. Practical implications This study develops a multidimensional liquidity index grounded in the theory of liquidity spillover at the market level. The index holds substantial potential as a proxy for further empirical research on cross-market liquidity spillovers. Originality/value This study contributes directly to the theory of liquidity spillovers by revising the existing literature, which overemphasizes the US as a source of shocks rather than other markets. The findings also support the efficient market hypothesis by showing that markets respond synchronously to shocks through cross-border liquidity channels.
Chu et al. (2026) studied this question.