Relationship between Liquidity, Volatility and Trading Activity: An Intraday Analysis of Indian Stock Market

Namitha K. Cheriyan and Lazar Daniel
Additional contact information
Namitha K. Cheriyan: CHRIST (Deemed to be University), Bengaluru, India,
Lazar Daniel: Pondicherry University, Puducherry, India

International Journal of Economics and Financial Issues, 2019, vol. 9, issue 1, 17-22

Abstract: The liquidity crunch arising out of volatile market conditions is a significant concern for investors across the globe. The trading activity in the market is an important attribute determining the liquidity as well as the volatility of any stock market. Given this triangular relationship, this study analyzes the relationship between liquidity, volatility and trading activity in the Indian stock market. Employing OLS regression estimates, the study identifies a contraction in liquidity in response to greater trading activity which is found to be increasing volatility in the market. It finds that higher volatility in Indian market is associated with greater illiquidity in the market. Even after adjusting for the impact of trading activity, volatility is found to be exhibiting a statistically significant impact on liquidity.

Keywords: Indian stock market; intraday liquidity; OLS regression; trading activity; volatility (search for similar items in EconPapers)
JEL-codes: C1 G11 G12 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econjournals.com/index.php/ijefi/article/download/7268/pdf (application/pdf)
https://www.econjournals.com/index.php/ijefi/article/view/7268/pdf (text/html)

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: https://EconPapers.repec.org/RePEc:eco:journ1:2019-01-3

Access Statistics for this article

International Journal of Economics and Financial Issues is currently edited by Ilhan Ozturk

More articles in International Journal of Economics and Financial Issues from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().