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Illiquidity of Frontier Financial Market: Case of Serbia

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Author Info

  • Boško Živković

    ()
    (Faculty of Economics, University of Belgrade, Serbia)

  • Jelena Minović

    ()
    (Faculty for Banking, Insurance and Finance, Belgrade Banking Academy, Union University, Serbia)

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    Abstract

    The paper explores illiquidity of the Serbian financial market for the period of 2005-2009. The financial market in Serbia is, by its type, a frontier market. We used daily data from the BELEXline index, as well as all stocks within this index in examined timeframe, provided by the Belgrade Stock Exchange. Results of this paper suggest that level of market liquidity is low and persistent in Serbia. Additionally, results confirm that time-varying illiquidity and its volatility is highly unstable in this market. This is the first paper that analyses liquidity issues in case of Serbia. It identifies different periods and shows that, in most cases, ups and downs in foreign investors’ participation leads to dramatic falls and rises in market illiquidity and its volatility.

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    File URL: http://www.panoeconomicus.rs/casopis/2010_3/07.pdf
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    Bibliographic Info

    Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

    Volume (Year): 57 (2010)
    Issue (Month): 3 (September)
    Pages: 349-367

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    Handle: RePEc:voj:journl:v:57:y:2010:i:3:p:349-367

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    Web page: http://www.panoeconomicus.rs/

    Related research

    Keywords: Frontier market; Illiquidity; Volatility of illiquidity; Conditional standard deviation;

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    References

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    1. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
    2. Sanford J. Grossman & Merton H. Miller, 1989. "Liquidity and Market Structure," NBER Working Papers 2641, National Bureau of Economic Research, Inc.
    3. Lesmond, David A & Ogden, Joseph P & Trzcinka, Charles A, 1999. "A New Estimate of Transaction Costs," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1113-41.
    4. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2007. "Liquidity and Expected Returns: Lessons from Emerging Markets," Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1783-1831, November.
    5. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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