Measuring liquidity in Indian stock market: A dimensional perspective

Naik, Priyanka; Poornima, B.; Reddy, Y.V.

doi:10.1371/journal.pone.0238718

Cited by 11 publications

(22 citation statements)

References 74 publications

(96 reference statements)

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“…Trading volume (TV) is defined as natural logarithm of cash trading volume (the cash trading volume is the number of shares traded * prices of the shares). Past studies (Alzahrani, 2011;Amihud, 2002;Amihud & Mendelson, 1986, 2008Chordia et al, 2003;Jones, 2002;Lo & Wang, 2000;Naik et al, 2020;Rosu, 2020) support the use of trading volume, as they show that the two concepts are closely interrelated. A higher trading volume suggests higher liquidity.…”

Section: Model Specification and Variable Measurementmentioning

confidence: 96%

Determinants of Stock Market Liquidity in Nigeria

Abdulkadir

Olatinwo

Afolabi

2022

LBIBF

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This paper examines the predictors of stock market liquidity in Nigeria. Using the autoregressive distributed lag (ARDL) bounds testing approach on monthly data series, the study finds evidence that stock market liquidity is enhanced with improved market performance and monetary interventions by the government. The study also finds that while liquidity persistence features in the market, high price levels impede market liquidity. However, no evidence is found for such persistence in the long run. Results obtained are robust to alternate specification of liquidity with the use of the AMIHUD illiquidity ratio. Policy holders and investors should consider the predictors documented in this study when making liquidity forecasts or investment decisions. This will assist to mitigate related risks, enhance market liquidity and consequently improve investors’ confidence in the market.

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Section: Model Specification and Variable Measurementmentioning

confidence: 96%

Determinants of Stock Market Liquidity in Nigeria

Abdulkadir

Olatinwo

Afolabi

2022

LBIBF

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“…(Ngoc, et al, 2021). (Karim and Rashid, 2021, Nadarajah et al, 2021, Naik P. et al, 2020, Pham et al, 2020, Dang et al, 2019, Ali et al, 2017 (Li and Di, 2019, Sarlak and Ahmadi, 2016, Amihud et al, 2015 . (Cheung et al, 2019, Brogaard et al, 2017, Ochenge et al, 2020 (Xia, 2021, Mbanyele and Wang, 2022, Im, et al, 2021, Naik, et al, 2020, Qin, 2020, Nadarajah, et al, 2021, Ochenge, et al, 2020, Lai and Trang, 2019, Kumar and Misra, 2019, Zhang, et al, 2019) :…”

Section: ‫كمكن‬ ‫تقدم،‬ ‫مما‬ ‫التالى:‬ ‫حو‬ ‫ال‬ ‫على‬ ‫ابع‬ ‫الر‬ ‫...mentioning

confidence: 99%

أثر كفاءة الشركات وتقلبات الأرباح على العلاقة بین سیولة الأسهم وتكلفة الملكیة- بالتطبیق على الشركات المدرجة بالسوق السعودى

على¹

2022

مجلة الاسکندریة للبحوث المحاسبیة

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Study Objective and Methodology: This study aims to analyze the relationship between stock liquidity and equity cost and the modified role of firm efficiency and earnings volatility, using data from a sample of 100 companies listed on the Saudi Arabia stock market during the period from 2012 to 2019. The researcher measures the stock liquidity based on Trade Volume (as a direct measure), the bid and ask stock prices differences (as indirect measure). The earnings volatilety was also measured by the abnormal returns level, moreover, the dividend model was used in calculating the equity cost (EC).Study Results: The results show that there is a negative significant effect of the firm efficiency on the bid and ask stock prices differences, and there is a positive significant effect of bid and ask stock prices differences on EC, which reflects the high cost of investments in light of the lack of stock liquidity. In other words, the high return rate required by investors with is increased in the stock's liquidity weakness. On the other hand, there is a negative significant impact of the bid and ask stock prices differences on EC in the presence of the firm efficiency, which reflects its role as a modifying variable, and it's an important tool to compensate for the weak stock liquidity from Investors' perspective.Moreover, the results show that there is a negative significant effect of abnormal returns on the trade volume, and there is a negative significant effect of the trade volume on the EC, which means that the high trade volume enables firms to obtain the necessary funds at the lowest possible cost and attract new investors. On the other hand, there is a positive significant effect of the stock trading volume on the EC in the presence of abnormal returns, which reflects its role as a modifier, and it's a negative indicator in the investors' evaluation and interpretation of the stock's high liquidity, which drives firms to make more dividends to facilitate obtaining the necessary financing by investors.The study Importance and Contribution: The study contributes to the accounting literature by providing evidence on the importance of improving stock liquidity in reducing the cost of capital. In addition, it highlights the important role of firm efficiency in reducing the EC, especially in the case of poor stock liquidity. It also contributes to focusing attention on the increase in the EC, despite the increase in the stocks' liquidity, especially with increase in the stock's returns volatility.

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“…They report results which indicate that local factors are relevant when exploring the importance of liquidity in asset pricing. According to Naik et al (2020), liquidity is a multidimensional concept. The major challenge is the choice of an appropriate measure, especially in emerging markets.…”

Section: Liquidity Risk and Asset Returnsmentioning

confidence: 99%

“…Liquidity is a multi-dimensional concept whose implication covers trading time and immediacy, tightness, depth, breath and resiliency. According to Naik et al (2020) and Minovic (2012), trading time refers to ability to execute transactions immediately at prevailing market prices. The waiting time between one trade and another as well as speed are critical.…”

Section: Liquidity Risk and Asset Returnsmentioning

confidence: 99%

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The causal relationship between coefficient of elasticity of trading and market return in an African emerging market

Ayadi

Paseda

2022

JBSED

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PurposeThe study aims to examine the appropriateness of the coefficient of elasticity of trading (CET) as a measure of liquidity using Nigerian stock market data. Given that liquidity is multidimensional, the CET is complemented with the popular measure of liquidity, turnover ratio to explore the causal relationship among the CET, turnover ratio and market return to determine their relevance in security valuation. In other words, an attempt is made to examine if either of these two measures of liquidity is a relevant factor in explaining stock market return.Design/methodology/approachThe Toda-Yamamoto version of Granger causality test is applied to two sets of data on the Nigerian Stock Exchange (NSE). The available monthly time series data are from 2008 to 2019 while the annual data are from 1986 to 2018. The Toda-Yamamoto test is preferred because it is more robust to integration and cointegration of the variables.FindingsThe results of the Toda-Yamamoto version of the Granger causality test on monthly data reveal no causal relationship between CET and market return, turnover and market return and CET with turnover and market return. These results are consistent with those for several frontier countries reported by Rubio et al. (2005), Hartian and Sitorus (2015), Batten and Vo (2019) and Sterenczak et al. (2020). The results support the conclusion that the Nigerian economy is not fully integrated with the global economy. Market inefficiency due to order imbalances given the nature of the trading system can also explain the reported results. However, the results from annual data do not tally with the monthly results. There is causality running from CET to market return. There is also causality running from turnover to market return. Therefore, both CET and turnover are statistically significant causal predictors of market return. The results from annual data are consistent with those reported by Marozva (2019).Research limitations/implicationsThe key limitation is availability of high-frequency transaction-level data to researchers to consider many measures of liquidity that have been employed in developed countries. The research implication is that more researchers will be encouraged to conduct more studies on liquidity and how the study results can drive policy recommendations. The standard asymptotic distribution of underlying the Toda-Yamamoto approach has been found to lead to overrejection.Originality/valueThis study is the first to apply Toda-Yamamoto model on data from Nigeria to investigate the causal relationship between stock market return and liquidity proxied by the CET given the nature of the automated trading system (ATS) in use. The CET is also complemented with the turnover ratio to explore the multidimensional nature of liquidity and its causal relationship with market return. The study is also interpreted as a determination of the integration of Nigeria's economy with the global economy with its implication on investment diversification.

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Measuring liquidity in Indian stock market: A dimensional perspective

Cited by 11 publications

References 74 publications

Determinants of Stock Market Liquidity in Nigeria

Determinants of Stock Market Liquidity in Nigeria

أثر كفاءة الشركات وتقلبات الأرباح على العلاقة بین سیولة الأسهم وتكلفة الملكیة- بالتطبیق على الشركات المدرجة بالسوق السعودى

The causal relationship between coefficient of elasticity of trading and market return in an African emerging market

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