You have been asked to review a memo on how market liquidity is affected by shocks to the financial system. Which of the following observations made in the memo are incorrect. Explain why.

1. In periods of acute market stress, market liquidity typically increases in the most liquid markets, creating a self-correcting loop that will ultimately remove downward pressure on asset prices
2. Evaporation of market liquidity is an important factor in determining whether and at what speed financial disturbances become financial shocks with potentially systemic threats
3. Market shocks may not be reflected in marked-to-market portfolio values immediately for portfolios with illiquid assets. As a result, it is possible for market shocks to have delayed effects on financial institutions
4. The impact of a market shock on the liquidity of a specific asset depends on the characteristics of the investor who own the asset