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Which Liquidity Proxy Measures Liquidity Best in Emerging Markets?

Author

Listed:
  • Hee-Joon Ahn

    (Business School, Sungkyunkwan University, 25-2, Sungkyunkwan-ro, Seoul 110-745, Korea)

  • Jun Cai

    (Department of Economics and Finance, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong, China)

  • Cheol-Won Yang

    (School of Business Administration, Dankook University, 152 Jukjeon-ro, Suji-gu, Yongin-si, Gyeonggi-do 16890, Korea)

Abstract

This study empirically investigates the low-frequency liquidity proxies that best measure liquidity in emerging markets. We carry out a comprehensive analysis using tick data that cover 1183 stocks from 21 emerging markets, while also comparing various low-frequency liquidity proxies with high-frequency spread measures and price impact measures. We find that the Lesmond, Ogden, and Trzcinka ( LOT ) measure is the most effective spread proxy in most emerging markets. Among the price impact proxies, the Amihud measure is the most effective.

Suggested Citation

  • Hee-Joon Ahn & Jun Cai & Cheol-Won Yang, 2018. "Which Liquidity Proxy Measures Liquidity Best in Emerging Markets?," Economies, MDPI, vol. 6(4), pages 1-29, December.
    • Handle: RePEc:gam:jecomi:v:6:y:2018:i:4:p:67-:d:189816
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    References listed on IDEAS

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    2. Kai-Yin Woo & Chulin Mai & Michael McAleer & Wing-Keung Wong, 2020. "Review on Efficiency and Anomalies in Stock Markets," Economies, MDPI, vol. 8(1), pages 1-51, March.
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    6. Zhao, Wandi & Gao, Yang & Wang, Mingjin, 2022. "Measuring liquidity with return volatility: An analytical approach based on heavy-tailed Censored-GARCH model," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    7. Stereńczak, Szymon & Kubiak, Jarosław, 2022. "Dividend policy and stock liquidity: Lessons from Central and Eastern Europe," Research in International Business and Finance, Elsevier, vol. 62(C).
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    10. Francisco Javier Vasquez-Tejos & Prosper Lamothe Fernández, 2020. "Liquidity Risk and Stock Return in Latin American Emerging Markets," Investigación & Desarrollo 0420, Universidad Privada Boliviana, revised Nov 2020.

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