Liquidity Variation and the Cross-Section of Stock Returns
This article presents a discussion of stock market liquidity and its relation to financial crises. It begins by defining liquidity and explaining possible measures of liquidity and then explores factors influencing liquidity. It also analyzes the liquidity among 11 Asian countries. The empirical findings based on the time-series analysis show a sharp decline in stock liquidity during both the 19971998 Asian and the recent 20072008 global financial crisis. The multivariate regression results show that both stock liquidity and trading activity decrease after large market declines. Stock liquidity responds significantly to large market declines in South Korea and Taiwan whereas it is least sensitive in Singapore. The findings indicate that stock trading, measured by turnover, slows down after a large market decline, which affects trading activity in all markets examined especially those of South Korea and China, but have the least effect in Singapore and Japan.
Asian markets, emerging markets, financial crisis, liquidity, trading activity
Liquidity Variation and the Cross-Section of Stock Returns. (2013). Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/4527
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