Size Effect in Market-wide Liquidity Commonality: Evidence from the Indian Stock Market
Size Effect in Market-wide Liquidity Commonality: Evidence from the Indian Stock Market
Author(s): Namitha K. Cheriyan, Daniel LazarSubject(s): National Economy, Methodology and research technology, Financial Markets, Accounting - Business Administration
Published by: Vilniaus Universiteto Leidykla
Keywords: liquidity; commonality in liquidity; NIFTY 50; liquidity measures;
Summary/Abstract: Liquidity commonality and the co-movements in trading costs related to such commonality have remarkable implications in market microstructure. Analyzing and identifying such commonality will enable the investor and policy maker to discover evidence regarding the inventory risks and asymmetric information influencing individual securities’ liquidity. Thus, this study aims at documenting the liquidity commonality and measuring its extent in the Indian stock market. Employing fourteen liquidity measures attributed to the cost, quantity, time, and multidimensional aspects of liquidity, it empirically proves the existence of co-movements among market-wide liquidity and the individual securities’ liquidity. The study also shows the presence of a size effect in liquidity commonality in Indian stock market. It is found that the slope coefficient indicating the interface between market-wide liquidity and individual securities’ liquidity generally increases with size.
Journal: Organizations and Markets in Emerging Economies
- Issue Year: 10/2019
- Issue No: 20
- Page Range: 335-355
- Page Count: 21
- Language: English