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Parametric test of liquidity wavering in response to the dynamic equity constituents

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  • Meskat Ibne Sharif

    (ISCTE-IUL: ISCTE-Instituto Universitario de Lisboa)

Abstract

This paper shows the impact of company-specific characteristics on the liquidity of equity instruments. Using equity instruments listed in NASDAQ, it is found that insider holdings have a significantly (1%) negative correlation with liquidity for all regression models even after adjusting for endogeneity using the IVREG and GMM model. The total share outstanding (TSO) has a significant negative correlation with liquidity across different specifications, but after adjusting for endogeneity it becomes positive and insignificant. The closing price has a significantly positive correlation with liquidity across models, but after exogenous variations through IVREG and GMM, it turns insignificantly positive. The non-parametric test confirms the consistency in the findings of different models. Finally, a robustness check suggests that the type of issuer plays a differential role in determining the liquidity of equity which is driven by selected covariates.

Suggested Citation

  • Meskat Ibne Sharif, 2023. "Parametric test of liquidity wavering in response to the dynamic equity constituents," SN Business & Economics, Springer, vol. 3(1), pages 1-26, January.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:1:d:10.1007_s43546-023-00419-2
    DOI: 10.1007/s43546-023-00419-2
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    More about this item

    Keywords

    Liquidity; Insider holding; Total share outstanding; Closing price; Public float;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other

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