Liquidity measurement in frontier markets

Marshall, Ben R.; Nguyen, Nhut H.; Visaltanachoti, Nuttawat

doi:10.1016/j.intfin.2013.07.011

Cited by 34 publications

(16 citation statements)

References 31 publications

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“…Empirically, the reliability of the Amihud (2002) illiquidity ratio has been verified in a series of horseraces using data from the U.S. (Goyenko et al, 2009), emerging markets (Lesmond, 2005), frontier markets (Marshall et al, 2013) and global stock exchanges (Fong et al, 2014b). In these four studies, the Amihud ratio is found to exhibit one of the highest correlations among cost-pervolume proxies with intraday benchmarks.…”

Section: Measuring Stock Liquiditymentioning

confidence: 92%

Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

2015

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Abstract:This paper examines the relationship between shareholdings of various investor groups and stock liquidity for Malaysian public listed firms over the [2002][2003][2004][2005][2006][2007][2008][2009] sample period. Using the Amihud illiquidity ratio, we extend the literature by addressing the issues of investor heterogeneity, trading account types and the interactions of competing liquidity channels. The analysis reveals that only local institutions and local individual investors who trade through the direct accounts are significantly associated with the liquidity of domestic firms. In contrast, the significant liquidity effect for foreign investors operates through the nominee accounts. While institutional ownership exhibits a linear negative relationship, our findings on local individuals and foreign nominees differ greatly from previous studies in that their relationship with stock liquidity is non-monotonic. Apart from the widely researched information asymmetry and trading effects, we find that liquidity is also driven by the largely ignored information competition channel. An important insight from our findings is that the large shareholdings by any particular investor group is detrimental to stock liquidity as they exacerbate information asymmetry, reduce the degree of competition and lower the level of trading activity.JEL Classifications: G12; G32

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Section: Measuring Stock Liquiditymentioning

confidence: 92%

Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

2015

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“…Spread and volume-related liquidity measures were used by Hallin et al (2011) and evidenced that both the measures are negatively correlated and give identical information about market liquidity and thus can be used as complementary to the other. In the context of liquidity in developing markets, Marshall et al (2013) found that Gibbs, Amihud, and Amivest measures prove to be effective measures, whereas in an emerging market, Będowska-Sójka and Echaust (2020) found that the Closing Quoted Spread measure based on daily data was the best performing liquidity measure during the periods of extreme liquidity. Furthermore, Będowska-Sójka (2018) made a comparison between different liquidity measures and concluded that the Amihud Illiquidity ratio evolves as the best transactional cost measure and Karstanje et al (2013) proved that zero return measure is a very strong and reliable measure for determining the timing of liquidating the trading positions.…”

Section: Measurement Of Stock Market Liquiditymentioning

confidence: 99%

Stock Market Liquidity: A Literature Review

Naik

Reddy

2021

SAGE Open

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The purpose of this study is to identify the key aspects that have been studied in the area of stock market liquidity, accumulate their important findings, and also provide a quantitative categorization of reviewed literature that will facilitate in conducting further research. The study analyzes relevant research papers published after the global financial crisis of 2008 and finds that measurement of liquidity, factors influencing liquidity, the relationship between market liquidity and expected return, and market liquidity risk and its relationship with expected returns have been explored in the context of the stock market liquidity. Among these, the factors influencing liquidity have been prominently researched in the reviewed studies. The study concludes that the identified areas can be potentially researched concerning the emerging markets by considering the multidimensional quality of market liquidity. Also, the inter-linkages between the liquidity of emerging markets with that of the global stock markets can be further evaluated.

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“…Employed in research analysis of very illiquid markets (Marshall et al 2013), it is estimated based on Fong et al (2011), with the proportion of zero stock returns z and the standard deviation of adjusted daily returns σ : Longstaff and Schwartz's (2001) option value for the maximum lack of marketability discount, assuming the standard deviation of the annualized daily stock returns is σ and T is the length of time the shares are illiquid: Longstaff and Schwartz's (2001) version for the upper bound for the thin-trading discount, which, in addition to the variables in the marketability discount Longst, incorporates the length L of the interval during which the investor can sell the illiquid security: Chacko et al (2008) derive the cost of purchasing (+) or liquidating (−) securities under a prevailing riskless rate r, security return volatility σ and expected waiting time…”

Section: Amivestmentioning

confidence: 99%

Is stock liquidity transferred and upgraded in acquisitions? Evidence from liquidity synergies in US freeze-outs

Konstantaras

Sogiakas

2018

Ann Oper Res

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This paper investigates the value successful bidders generate from acquiring less liquid targets. This synergy is traced with both theoretical and empirical evidence from the squeeze-out stage of going private transactions, when bidders hold sizeable toeholds in target shares. By transferring their superior liquidity, acquirers can add value to the valuation of their toeholds in fully acquired target assets. We use a sample of US delisted targets from globally listed acquirers over 25 years, and, in line with our theoretical analysis, a nonlinear relation is evidenced between the expected added value from liquidity transfer and illiquidity differences. The adjustment of target market prices for the attached option to participate in the bid in a new stochastic volatility framework reveals that the bulk of deal-generated wealth depends on the offered option. Although the market penalizes the mean acquirer with negative abnormal returns, those with higher liquidity differences from their targets are suffering less because of their greater potential of liquidity transfer synergy. The analysis of the probability that the offered option gets in the money reveals that liquidity transfer acts as a catalyst for successfully concluding the deal and underlies underbidding.

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Liquidity measurement in frontier markets

Cited by 34 publications

References 31 publications

Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

Stock Market Liquidity: A Literature Review

Is stock liquidity transferred and upgraded in acquisitions? Evidence from liquidity synergies in US freeze-outs

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