Illiquidity Effects in the Russian Stock Market

Sergei Gurov
Additional contact information
Sergei Gurov: National Research University Higher School of Economics, Moscow, Russia

HSE Economic Journal, 2023, vol. 27, issue 1, 78–102

Abstract: This work examines the impact of expected and unexpected illiquidity of Russian stockstraded on the Moscow Exchange on their ex ante and simultaneous excess returns. Following quantitative predictions of the market microstructure invariance hypothesis, I calculate the ex­pected ruble costs of executing a bet in the Russian stock market. This estimate is used to compute the invariance-implied low-frequency illiquidity measure for individual stocks. The expec­ted market illiquidity is estimated by a first-order autoregressive model, and the surprise illiquidity is the residuals from this model. We use two weighting methods (equal-weighting and value-wei­ghting) to calculate market returns, market illiquidity, as well as returns on size-based portfolios. According to the empirical analysis over the period from January 2010 to December 2020, the market premium for expected illiquidity in the Russian equity market was insignificant in most specifications, unlike the effect of unexpected market illiquidity. The negative effect of market illiquidity shocks on market returns is insignificant only in the case of using equal-weighted procedure over the period from January 2010 to June 2015. The weak form of the hypothesis that illiquidity effects are stronger for small-cap stocks is confirmed only in the case of using equal-weighting method over the period from July 2015 to December 2020.

Keywords: illiquidity premium; invariance; expected illiquidity; market microstructure; illiquidity shocks; asset pricing (search for similar items in EconPapers)
JEL-codes: G01 G10 G12 G15 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ej.hse.ru/en/2023-27-1/819341012.html (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: https://EconPapers.repec.org/RePEc:hig:ecohse:2023:1:4

Access Statistics for this article

More articles in HSE Economic Journal from National Research University Higher School of Economics
Bibliographic data for series maintained by Editorial board () and Editorial board ().