Measuring Liquidity Risk in an Emerging Market: Liquidity Adjusted Value at Risk Approach for High Frequency Data

Rouetbi Emnal and Mamoghli Chokri
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Rouetbi Emnal: Institut sup rieur de finance et fiscalit Sousse, Rue 18 janvier Sousse, Tunisia.
Mamoghli Chokri: Institut des Hautes Etudes Commerciales, 2016 Carthage Presidence, Tunisia.

International Journal of Economics and Financial Issues, 2014, vol. 4, issue 1, 40-53

Abstract: The present paper introduces an enhanced liquidity adjusted intraday value at risk measure named the LIVaR applied to a sample of listed securities in an emerging market; namely the Tunis Stock Exchange (BVMT). Very specific econometric tools were used to perform models that suit the statistical properties of the data and to obtain a more realistic and efficient measure. This methodology was applied to intraday data. It was found that in the BVMT, the liquidity risk is very high. It represents about 25% of the total cost supported by a day trader for the most active stocks of the considered sample. It can also reach more than 40% for the less liquid ones. These results reveal how thin the Tunis stock market is. Classification-JEL: C41; G17

Keywords: Liquidity; intraday value at risk; spread; ACD; Monte Carlo simulation. (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ1:2014-01-6

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