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Parametric test of liquidity wavering in response to the dynamic equity constituents

Meskat Ibne Sharif (meskat_ibne_sharif@iscte-iul.pt)
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Meskat Ibne Sharif: ISCTE-IUL: ISCTE-Instituto Universitario de Lisboa

SN Business & Economics, 2023, vol. 3, issue 1, 1-26

Abstract: Abstract This paper shows the impact of company-specific characteristics on the liquidity of equity instruments. Using equity instruments listed in NASDAQ, it is found that insider holdings have a significantly (1%) negative correlation with liquidity for all regression models even after adjusting for endogeneity using the IVREG and GMM model. The total share outstanding (TSO) has a significant negative correlation with liquidity across different specifications, but after adjusting for endogeneity it becomes positive and insignificant. The closing price has a significantly positive correlation with liquidity across models, but after exogenous variations through IVREG and GMM, it turns insignificantly positive. The non-parametric test confirms the consistency in the findings of different models. Finally, a robustness check suggests that the type of issuer plays a differential role in determining the liquidity of equity which is driven by selected covariates.

Keywords: Liquidity; Insider holding; Total share outstanding; Closing price; Public float (search for similar items in EconPapers)
JEL-codes: G10 G12 G19 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s43546-023-00419-2

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