Liquidity and short-run predictability: Evidence from international stock markets

Jin Suk Park and Mohammad Khaleq Newaz

Global Finance Journal, 2021, vol. 50, issue C

Abstract: This study investigates the determinants of short-run predictability in international stock markets, where predictability is defined as the accuracy of the best-combined daily forecasts. Contrary to popular belief, illiquid markets, characterized by high transaction costs and large price impact, are not necessarily highly predictable. Instead, markets with larger trading volume are more predictable, especially after the global financial crisis and in emerging markets. Those with larger market capitalization, steeper upward trends, and positively skewed returns are less predictable. Company financial strength has limited influence. During the COVID-19 pandemic the markets have become more predictable, with stronger price trends. Emerging markets are less predictable when relatively over- or undervalued.

Keywords: Transaction costs; Price impact; Market efficiency; Forecasting accuracy; COVID-19 (search for similar items in EconPapers)
JEL-codes: G12 G14 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1044028321000715
Full text for ScienceDirect subscribers only

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:eee:glofin:v:50:y:2021:i:c:s1044028321000715

DOI: 10.1016/j.gfj.2021.100673

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().