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Intraday Liquidity Patterns in Indian Stock Market

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  • R. Krishnan
  • Vinod Mishra

Abstract

This paper attempts to study the liquidity patterns and to detect any commonality across liquidity measures, using one year intraday data from India's National Stock Exchange (NSE). Using the data on 20 stocks from NSE's NIFTY Index, we found that most of the volume and spread related liquidity measures exhibit an intra-day U-shaped pattern, similar to those found for a market consisting of market makers. However, we also note that the presence of U-shaped pattern in both the volume related and spread related measures,implying a concurrent high trading volume and wide spreads. While such a phenomena has been reported previously for a market with a specialist liquidity provider and can be explained using the Brock and Kleidon (1992) model [Journal of Economic Dynamics and Control, 16, 451-489 ], it is for the first time we observe such a behaviour in Indian stock market; an order driven market where there is no market maker. Besides, we find only a weak evidence of co-movement or commonality in liquidity measures. This suggests that market wide factors may not play a significant role in affecting the liquidity of individual stocks, hinting that such factors need not be a part of the asset pricing process.

Suggested Citation

  • R. Krishnan & Vinod Mishra, 2012. "Intraday Liquidity Patterns in Indian Stock Market," Monash Economics Working Papers 34-12, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2012-34
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    Cited by:

    1. Ijaz Ur Rehman & Nurul Shahnaz Mahdzan & Rozaimah Zainudin, 2016. "Is the relationship between macroeconomy and stock market liquidity mutually reinforcing? Evidence from an emerging market," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(3), pages 294-316.
    2. Alexandre de Carvalho & Alberto Sanyuan Suen & Felippe Gallo, 2016. "Market Efficiency in Brazil: some evidence from high-frequency data," Working Papers Series 431, Central Bank of Brazil, Research Department.

    More about this item

    Keywords

    Liquidity; Intraday data; Commonality; NSE; India;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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