Empirical measures of liquidity — a new approach

R Adams, R Williams and E Acar ()
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E Acar: Citibank, NA, Foreign Exchange, Citigroup Centre

Journal of Asset Management, 2001, vol. 2, issue 1, No 7, 75-83

Abstract: Abstract It is not just in extreme situations that liquidity becomes an important issue for financial market participants. Many investors and traders, alike, now make an assessment of liquidity as a part of their day-to-day decision-making processes. This paper proposes a new definition of liquidity while investigating its relationship with existing proxies: volume, volatility, number of trades. When applied to a set of foreign exchange data (EBS provided by — Electronic Broking Services), our liquidity score uncovers new stylised facts that have the potential to help participants with execution decisions and, more importantly, enhance their access to the markets.

Keywords: liquidity; distance; volume; volatility; bid-ask spreads; intra-day measures (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1057/palgrave.jam.2240036

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