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Dimensions of Market Liquidity: The Case of the Polish Stock Market

In: Advances in Applied Economic Research

Author

Listed:
  • Joanna Olbrys

    (Bialystok University of Technology)

  • Michal Mursztyn

    (Bialystok University of Technology)

Abstract

Liquidity in a financial market is not a one-dimensional variable but it includes several dimensions. The main aim of this paper is an empirical analysis of market liquidity dimensions on the Warsaw Stock Exchange (WSE). We investigate market depth and market tightness for the 53 WSE-listed companies divided into three size groups. The high-frequency data covers the period from January 3, 2005 to June 30, 2015. The additional goal is robustness analysis of the results obtained with respect to the whole sample period and three adjacent subsamples of equal size: the pre-crisis, crisis, and post-crisis periods. The order ratio (OR) is employed as a proxy of market depth, while market tightness is approximated using the relative spread (RS). In line with the expectations, the empirical results indicate that the OR values rather do not depend on firm size, while the RS estimates are slightly higher for small companies. Moreover, the results turn out to be robust to the choice of the sample. Furthermore, an initial research concerning interaction between liquidity dimensions on the WSE is provided by analyzing the degree of correlation between market depth and market tightness. In general, the correlation results are consistent with the literature. The majority of correlation coefficients between daily estimates of the order ratio and the relative spread indicators are not significantly different from zero.

Suggested Citation

  • Joanna Olbrys & Michal Mursztyn, 2017. "Dimensions of Market Liquidity: The Case of the Polish Stock Market," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Applied Economic Research, chapter 0, pages 151-166, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-48454-9_12
    DOI: 10.1007/978-3-319-48454-9_12
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    Citations

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    Cited by:

    1. Olbrys, Joanna & Mursztyn, Michal, 2019. "Estimation of intraday stock market resiliency: Short-Time Fourier Transform approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 535(C).
    2. Olbrys, Joanna & Mursztyn, Michal, 2019. "Measuring stock market resiliency with Discrete Fourier Transform for high frequency data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 513(C), pages 248-256.
    3. Joanna Olbryś & Michał Mursztyn, 2017. "Measurement of stock market liquidity supported by an algorithm inferring the initiator of a trade," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 27(4), pages 111-127.
    4. Priyanka Naik & B G Poornima & Y V Reddy, 2020. "Measuring liquidity in Indian stock market: A dimensional perspective," PLOS ONE, Public Library of Science, vol. 15(9), pages 1-17, September.

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