Liquidity Measuring of Financial Market in Western Balkan Region: The Case of Serbia

Jelena Minovic ()
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Jelena Minovic: Institute of Economic Sciences

Chapter 27 in Contemporary Issues in the Integration Processes of Western Balkan Countries in the European Union, 2011, pp 443-459 from Institute of Economic Sciences

Abstract: This paper presents theoretical and empirical studies on liquidity measuring of financial market in the Western Balkan region (the Serbian market). Liquidity itself is not observable and therefore, has to be proxies by different liquidity measures. The liquidity measures covered in this paper are: Bid-Ask Spread, Amivest’s measure, Amihud’s measure, Amihud’s based measure, zero-return proportion, and price pressure of non-trading. Market liquidity is a fundamental aspect of market development. In order integrate Serbian market into EU financial market, structural change is required. Serbian market belongs to frontier markets. One of the major requirements that this market transforms to emerging, and then to develop market is to improve its liquidity. For empirical analysis of Serbian market liquidity we use two measures: zero-return proportion and price pressure of non-trading as in Bekaert, Harvey, and Lundblad (2007), for the period: 2005-2009. Results of this paper showed that the Serbian market is extremely illiquid. It is just one of the key barriers that foreign investors face while investing in the Western Balkan region. Additionally, for whole the Serbian market, the most illiquid year was 2008, while the least illiquid year was 2007, according to the value of zero-return proportion. Particularly, in the post-crises period level of illiquidity increased for both BELEX indices.

Keywords: Liquidity; zero-return proportion; price pressure measure; BELEX indices; Western Balkan (search for similar items in EconPapers)
Date: 2011
ISBN: 978-961-93203-0-3
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