Low-dimensional Characterisation of Liquidity of Individual Stocks in the Indian Market. (August 2013)

• Record Type: Journal Article
• Authors: Chatterjee, Devlina; Mukhopadhyay, Chiranjit
• Is Part Of: Journal of emerging market finance. Volume 12:Number 2(2013)
• Page Start: 151
• Page End: 196
• Publication Date: 2013-08
• Subjects: Liquidity -- stock market -- factor analysis -- National Stock Exchange of India; Banks and banking -- Developing countries -- Periodicals; Financial institutions -- Developing countries -- Periodicals; Securities -- Developing countries -- Periodicals; 332.09172405
• DOI: 10.1177/0972652713494044
• Languages: English
• ISSNs: 0972-6527

Abstract

There is no single, definitive and universally accepted measure of a stock's 'liquidity'. The literature proposes a large number of proxy measures for liquidity. Suitable low dimensional characterisation of liquidity may improve understanding and enable better market regulation. We present factor analyses of stock-specific liquidity measures, using cross-sectional data from the National Stock Exchange of India, for two time periods reflecting different market conditions. Day-wise analyses of eleven liquidity proxies suggest five factors, interpretable as spread, depth, volume, price elasticity and relative activity. Consistency in the results obtained from the two periods suggests that the factor structure is stable. JEL Classification: G11, C38