Gabrielsen, Alexandros and Marzo, Massimiliano and Zagaglia, Paolo (2011): Measuring market liquidity: an introductory survey.
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Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus delivering low costs of transaction. Providing a rigorous and empirically relevant definition of market liquidity has, however, provided to be a difficult task. This paper provides a critical review of the frameworks currently available for modelling and estimating the market liquidity of assets. We consider definitions that stress the role of the bid-ask spread and the estimation of its components that arise from alternative sources of market friction. In this case, intra-daily measures of liquidity appear relevant for capturing the core features of a market, and for their ability to describe the arrival of new information to market participants.
|Item Type:||MPRA Paper|
|Original Title:||Measuring market liquidity: an introductory survey|
|English Title:||Measuring market liquidity: an introductory survey|
|Keywords:||market microstructure; liquidity risk; frictions; transaction costs|
|Subjects:||G - Financial Economics > G1 - General Financial Markets
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G10 - General
|Depositing User:||Paolo Zagaglia|
|Date Deposited:||10 Jan 2012 04:31|
|Last Modified:||02 Oct 2016 03:00|
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