An Analysis of Aggregate Market Liquidity: The Case of Amman Stock Exchange

Abstract

The purpose of this study is to analyze the behavior, the day-of-the-week regularities and the macroeconomic determinants of aggregate market liquidity of emerging stock markets through studying Amman Stock Exchange (ASE). The study investigates all the stocks traded in ASE over the period [2002][2003][2004][2005][2006][2007][2008][2009][2010]. Aggregate market liquidity is measured by several proxies, each reflecting a certain dimension. It is calculated as an average of individual stock liquidity proxies and as a sum of trading activity measures. Aggregate market liquidity shows a fluctuating pattern throughout the study period. It gets worse in the mid-week. Spread and depths show their maximum values on Mondays and Sundays, respectively. The trading activity reaches its minimum on Sunday and its maximum on Thursday. Major macroeconomic factors significantly affect aggregate market liquidity, though; aggregate market return and volatility exercise a larger effect. This study is the first to conduct a comprehensive analysis of aggregate market liquidity in an emerging stock market.

Monetary Policy and Liquidity of Vietnam’s Stock Market

“…A shock of CPI would boost the rates of market illiquidity, as prescribed by scholars, indicating an increase in costs of processing orders and inventory holdings due to inflation reflected in higher costs of trading. Alrabadi (2012) found no evidence relating to the effects of inflation as a macroeconomic variable on spread and depth measures, but trading activity measures are highly affected. To the same extent, Fernandez-Amador et al ( 2013) offered inconsistent findings on effects of inflation of previous terms on stock liquidity.…”

Day-of-the-Week Effects in Liquidity on the Warsaw Stock Exchange

“…In order to test the presence of seasonality anomalies in stock returns, volatility or liquidity, various versions of GARCH-type models (Bollerslev, 1986) have been applied in the literature (e.g. Choudhry, 2000;Franses, Paap, 2000;Berument, Kiymaz, 2001;Kiymaz, Berument, 2003;Apolinario et al, 2006;Žikeš, Bubák, 2006;Alrabadi, 2012). In this research, the GARCH(p, q) model is utilised.…”

“…On the contrary, relatively little empirical research has been conducted on the day-of-the-week effects in liquidity on equity markets (e.g. Jain, Joh, 1988;Foster, Viswanathan, 1993;Chordia et al, 2001;Chordia et al, 2005;Hameed et al, 2010;Alrabadi, 2012;Karolyi et al, 2012).…”