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I'm going to write the MSc thesis on flight-to-liquidity phenomenon in stock markets and I'm interested in liquidity measures other than Amihud or bid-ask spread.

What are some other popular measures of liquidity?

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If you explain what Amhiud is, I might give you another one. –  Konsta Oct 20 '12 at 21:58
    
gee, how much lazier can it get. Why don't you ask us to write your thesis for you. Even my English as non-native speaker should suffice and I could even whip together couple pages off various wiki sources. –  Matt Wolf Oct 21 '12 at 10:26

1 Answer 1

There are several. This list is from Giyenko et al (2008)---in their work they compare all these different measures--- and includes spread proxies and price impact proxies. As for spread proxies:

  • "Effective Tick" (Holden 2007, Giyenko et al 2008)
  • "Holden measure" (Holden 2007)
  • "LOT Y-split" (Giyenko et al 2008)
  • "Roll measure" (Roll 1984)
  • "Gibbs measure" (Hasbrouck 2004)
  • "LOT mixed" (Lesmond et al 1999)
  • "Zeros" and "Zeroes2" (Lesmond et al 1999)
  • "Amihud measure" (Amihud 2002)
  • "Pastor and Stambaugh" (Pastor and Stambaugh 2003)
  • Amivest Liquidity Ratio

Some of these can be interpreted and modified to proxy for price impact. Indeed, any model of price impact is closely linked with liquidity.

From a Macro and theoretical perspective, Tirole has something good to say (as always)

Tirole, J. (2011). Illiquidity and all its friends. Journal of Economic Literature 49(2), 287–325.

If I remember correctly it established a simple link between the common intuition that Repos, leverage ratios, and other borrowing measures bear relevance to the problem of measuring illiquidity.

Specifically on flight to quality (theoretical, but with an empirical application):

Brunnermeier, M. and L. Pedersen (2009). Market liquidity and funding liquidity. Review of Financial Studies 22(6), 2201–2238.

Bonus reading:

Brunnermeier, M. (2009). Deciphering the liquidity and credit crunch 2007-2008. Journal of Economic Perspectives 23(1), 77–100.

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