Impact of liquidity on stock returns: an empirical investigation of the Tunisian stock market
Mohamed Bechir Zayani and
Abdelwahed Omri ()
Macroeconomics and Finance in Emerging Market Economies, 2010, vol. 3, issue 2, 261-283
This paper investigates the return-liquidity relationship on one Middle East and North Africa frontier market, the Tunisian Stock Exchange (TSE). The findings provide evidence that there is a significant and positive premium for companies with high price impact and low trading frequency. However, Tunisian investors appreciate more low spread stocks. We show, also, a non-linear relation between potential delays of execution and stock returns. In addition, we find that Tunisian investors require a premium to compensate past cumulative illiquidity risk (high price impact, low turnover and high potential delay of execution) over the prior three to 12 months and to compensate past cumulative spread over 12 months. We point out also that these effects are seasonal.
Keywords: return; liquidity; Tunisian stock market (search for similar items in EconPapers)
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