IDEAS home Printed from https://ideas.repec.org/a/eme/rafpps/raf-04-2020-0102.html
   My bibliography  Save this article

Liquidity risk, transaction costs and financial closedness: lessons from the Iranian and Turkish stock markets

Author

Listed:
  • Sedighe Alizadeh
  • Mohammad Nabi Shahiki Tash
  • Johannes Kabderian Dreyer

Abstract

Purpose - This paper aims to study the impact of liquidity risk and transaction costs on stock pricing in Iran, a closed market operating under a financial embargo and compare the results with those of an important neighboring market, namely, Turkey. Design/methodology/approach - This study follows Liuet al.(2016) and incorporates liquidity risk and transaction costs into the traditional consumption-based asset-pricing model (CCAPM) from 2009 to 2017. Effective transaction costs are estimated a la Hasbrouck (2009) and liquidity risk according to eight different criteria. Findings - According to the results, both liquidity risk and transaction costs are higher in Iran, possibly due to the financial embargo. Thus, relative to Turkey, this paper should expect a higher increase in the CCAPM pricing performance in Iran when accounting for these two variables. The results are in line with this expectation and indicate that adjusting the CCAPM significantly increases its pricing performance in both countries, but relatively more in Iran. Originality/value - This study compares liquidity risk and transaction costs in an economy under the extreme case of a financial embargo to an open yet in other important aspects similar economy from the same region.

Suggested Citation

  • Sedighe Alizadeh & Mohammad Nabi Shahiki Tash & Johannes Kabderian Dreyer, 2021. "Liquidity risk, transaction costs and financial closedness: lessons from the Iranian and Turkish stock markets," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 20(1), pages 84-102, July.
    • Handle: RePEc:eme:rafpps:raf-04-2020-0102
    DOI: 10.1108/RAF-04-2020-0102
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/RAF-04-2020-0102/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/RAF-04-2020-0102/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/RAF-04-2020-0102?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lang, Qiaoqi & Ma, Feng & Mirza, Nawazish & Umar, Muhammad, 2023. "The interaction of climate risk and bank liquidity: An emerging market perspective for transitions to low carbon energy," Technological Forecasting and Social Change, Elsevier, vol. 191(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:rafpps:raf-04-2020-0102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.