Measuring liquidity in emerging markets

Kang, Wenjin, and Zhang, Huiping (2014) Measuring liquidity in emerging markets. Pacific-Basin Finance Journal, 27. pp. 49-71.

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We propose a modified version of the Amihud illiquidity measure, AdjILLIQ, which performs well in different types of emerging markets. Our AdjILLIQ measure combines the virtues of the original Amihud ratio and the non-trading-frequency measure. It exhibits higher correlation with spread and price impact than other existing low-frequency liquidity measures in most of our sample markets. The improvement gained from using our AdjILLIQ measure is particularly significant in inactively-traded markets and low-turnover stocks. We find that the liquidity in emerging markets, as measured by AdjILLIQ, can be improved by better disclosure and less information asymmetry. Furthermore, the liquidity dry-up during market downturns can also be alleviated by better information environment.

Item ID: 42819
Item Type: Article (Research - C1)
ISSN: 0927-538X
Keywords: liquidity measure, emerging market
Funders: Shanghai University of Finance & Economics, National University of Singapore (NUS)
Date Deposited: 24 Aug 2016 01:05
FoR Codes: 14 ECONOMICS > 1402 Applied Economics > 140207 Financial Economics @ 100%
SEO Codes: 90 COMMERCIAL SERVICES AND TOURISM > 9001 Financial Services > 900102 Investment Services (excl. Superannuation) @ 100%
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