Liquidity Measurement Based on Bid-Ask Spread, Trading Frequency, and Liquidity Ratio: The Use of GARCH Model on Jakarta Stock Exchange (JSX)

Erie Febrian () and Aldrin Herwany ()
Additional contact information
Erie Febrian: Finance & Risk Management Study Group (FRMSG) FE UNPAD
Aldrin Herwany: Research Division, Laboratory of Management FE UNPAD

No 200910, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: This paper attempts to investigate and clarify previous studies on market liquidity measurement, which involve Bid-Ask Spread, Trading Frequency, and Liquidity Ratio variables. To strengthen our findings, we employ Volatility Models of ARCH and GARCH, as well as JSX daily, weekly, and monthly time series data. Our findings reveal that the observed variables are able to explain volatility magnitude of JSX in terms of liquidity. Volatility model incorporating Trading Frequency variable with monthly data is found the most suitable model for measuring liquidity of JSX.

Keywords: Bid-Ask Spread; Trading Frequency; Liquidity Ratio; and ARCH/GARCH (search for similar items in EconPapers)
JEL-codes: G0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mst
Date: 2009-09, Revised 2009-09
View list of references

Downloads: (external link)
http://www.equitablepolicy.org/wpaper/200910.pdf First version, 2009 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:unp:wpaper:200910

Access Statistics for this paper

More papers in Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University
Contact information at EDIRC.
Series data maintained by Arief Anshory Yusuf ().