Studies of liquidity in the London Stock Exchange

Wang, Andong

Business
October 2017

Thesis or dissertation


Rights
© 2017 Andong Wang. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.
Abstract

The thesis studies liquidity related issues in the London Stock Exchange from 2001 to 2013 from different viewpoints. The first chapter introduces and motivates the study. The second chapter fully discusses the liquidity and liquidity measures from multiple dimensions and examines liquidity using five liquidity measures: relative spread, the Amihud ratio, the Rtotr ratio, zero trading volume days and zero return days. The time-series study shows that liquidity changes over time and largely depends on the financial environment. The analysis compares liquidity measures and finds that Rtotr may not be a reliable liquidity measure during a financial crisis due to the turnover anomaly. Moreover, the empirical results support the prior findings in the literature that relative spread is positively related to volatility, and negatively related to price and trading volume. The Amihud ratio, zero trading days and zero return days are better measures of explaining relative spread. All these findings give a better understanding of liquidity measures and enlighten the following deeper research.

The third chapter continues to study liquidity and market characteristics from a panel viewpoint and the chapter extends the fixed effects model to solve the problem that some of the variables are not stationary. The panel results give more powerful explanations of liquidity. In particular, less liquid stocks are associated with higher volatility, lower price and lower trading volume. Market value has differing relationships with the various liquidity measures.

The fourth chapter expands the liquidity research field and contains both theoretical and empirical work indicating that more liquid stocks have higher kurtosis and first lag autocorrelation due to higher transaction costs. In addition, the empirical results show skewness is also negatively related to liquidity. The final chapter presents the conclusions of the research.

Publisher
Business School, The University of Hull
Supervisor
Hudson, Robert, 1961-
Qualification level
Doctoral
Qualification name
PhD
Language
English
Extent
3 MB
Identifier
hull:16467
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