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Liquidity at the Oslo Stock Exchange

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Author Info

  • Randi Næs

    (Norges Bank (Central Bank of Norway))

  • Johannes A. Skjeltorp

    ()
    (Norges Bank (Central Bank of Norway))

  • Bernt Arne Ødegaard

    (Norwegian School of Management and Norges Bank (Central Bank of Norway))

Abstract

We analyze the relationship between the long term development in liquidity at the Oslo Stock Exchange and the Norwegian economy for the period 1980 to 2007. We calculate different liquidity measures that captures various dimensions of liquidity over time and across industry groups. Overall, we find that the liquidity at the OSE has improved over the sample period. However, the improvement is most pronounced for the largest firms on the exchange. Interestingly, some measures indicate that the implicit cost of trading has been lower in earlier periods than it is today. Another important finding is that there is a strong counter cyclical relationship between proportional transaction costs measured by the relative spread and the business cycle measured by the output gap. The average relative spread also responds very quickly to the turning points of the business cycle. This result suggest that liquidity measures provide important real time information about the current state of the economy as well as market participants expectations about future economic growth.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2008/WP-20089/
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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2008/09.

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Length: 49 pages
Date of creation: 08 May 2008
Date of revision:
Handle: RePEc:bno:worpap:2008_09

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Related research

Keywords: Liquidity; Market microstructure;

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Cited by:
  1. Rakkestad, Ketil & Skjeltorp, Johannes & Ødegaard, Bernt Arne, 2012. "The liquidity of the Secondary Market for Debt Securities in Norway," UiS Working Papers in Economics and Finance 2012/12, University of Stavanger.
  2. Ødegaard, Bernt Arne, 2012. "Empirics of the Oslo Stock Exchange. Liquidity results 1980-2011," UiS Working Papers in Economics and Finance 2012/5, University of Stavanger.
  3. Söderberg, Jonas, 2008. "Do Macroeconomic Variables Forecast Changes in Liquidity? An Out-of-sample Study on the Order-driven Stock Markets in Scandinavia," CAFO Working Papers 2009:10, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University.
  4. Ødegaard, Bernt Arne, 2009. "The (implicit) cost of equity trading at the Oslo Stock Exchange. What does the data tell us?," UiS Working Papers in Economics and Finance 2009/17, University of Stavanger.

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