International stock market liquidity: a review

Purpose – The purpose of this paper is to review the literature on liquidity in international stock markets, highlights differences and similarities in empirical results across existing studies, and identifies areas requiring further research. Design/methodology/approach – International cross-countr...

Full description

Saved in:
Bibliographic Details
Published in:Managerial finance 2016-02, Vol.42 (2), p.118-135
Main Authors: Ma, Rui, Anderson, Hamish D, Marshall, Ben R
Format: Article
Language:English
Subjects:
Accounting & Finance
Algorithms
Asked price
Automation
Economic crisis
Efficiency
Electronic trading systems
Emerging markets
Financial management/structure
High frequency trading
Liquidity
Program trading
Securities markets
Short sales
Stock exchanges
Studies
Volatility
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Purpose – The purpose of this paper is to review the literature on liquidity in international stock markets, highlights differences and similarities in empirical results across existing studies, and identifies areas requiring further research. Design/methodology/approach – International cross-country studies on stock market liquidity are categorized and reviewed. Important relevant single-country studies are also discussed. Findings – Market liquidity is influenced by exchange characteristics (e.g. the presence of market makers) and regulations (e.g. short-sales constraints). The literature has identified the most appropriate liquidity measures for global research, and for emerging and frontier markets, respectively. Major empirical facts are as follows. Liquidity co-varies within and across countries. Both the liquidity level and liquidity uncertainty are priced internationally. Liquidity is positively associated with firm transparency and share issuance, and negatively related to dividends paid out. The impact of internationalization on liquidity is not universal across firms and countries. Some suggested areas for future studies include: dark pools, high-frequency trading, commonality in liquidity premium, funding liquidity, liquidity and capital structure, and liquidity and transparency. Research limitations/implications – The paper focusses on international stock markets and does not consider liquidity in international bond or foreign exchange markets. Originality/value – This paper provides a comprehensive survey of empirical studies on liquidity in international developed and emerging stock markets.
ISSN:0307-4358
1758-7743
DOI:10.1108/MF-04-2015-0096