Stock market liquidity: Implications for market microstructure & asset pricing

Stock Market Liquidity brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. Liquidity is an elusive concept but can be loosely defined as the ability to trade a large number of securities quickly and at low cost. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares traded etc.), order based measures (such as quoted spreads, effective spreads, depth etc.) and price impact measures. The various papers in this collection study liquidity along many different dimensions. The questions asked and answered include: How does liquidity vary across markets (stocks, bonds, money market instruments, derivatives, etc.) and across different international exchanges (Tunisia, Turkey, Hong Kong etc.)? How does market design impact liquidity? What affect do corporate events have on liquidity? What impact does the level of liquidity as well as liquidity risk have on asset prices?

Foreword by Tarun Chordia.

About the Editors.

About the Contributors.

Part One. Liquidity Across Markets and Exchanges.

Chapter 1. Order Imbalance, Liquidity, and Market Returns.

Tarun Chordia, Richard Roll, and Avanidhar Subrahmanyam.

Chapter 2. Liquidity Provision in the Hong Kong Warrants Market.

Evidence from Equity, Derivative, and Basket Warrants.

Paul Brockman and Dennis Y. Chung.

Chapter 3. Liquidity Issues in the Money Markets.

Mark D. Griffiths, Valdimir Kotomin and Drew B. Winters.

Chapter 4. Liquidity and the Retail Investor: The Australian Market for Retail CDOs.

Paul U. Ali.

Chapter 5. Short Term Interest Rates Volatility and Liquidity Risk.

Cecilia Caglio, Giampaolo Gabbi and Giovanna Zanotti.

Chapter 6. Intraday Liquidity in the Istanbul Exchange.

Cumhur Ekinci.

Chapter 7. International portfolio allocations during the Asian financial crisis.

Evidence from lace U.S. closed end funds.

Kalok Chan, Kee Hong Bae and Wai Ming Fong^c.

Part Two. Market Design, Corporate Events and Liquidity.

Chapter 8. Evidence on the Speed of Convergence to Market Efficiency.

Tarun Chordia, Richard Roll, and Avanidhar Subrahmanyam.

Chapter 9. Does Market Structure Matter? Trading Costs and Return Volatility Around Exchange Listings.

Hendrik Bessembinder and Subhrendu Rath.

Chapter 10. Tick Size, Market Structure and Trading Costs

William G. Christie, Jeffrey H. Harris and Eugene Kandel.

Chapter 11. Intraday Market Dynamics Around Public Information Arrivals.

Angelo Ranaldo.

Chapter 12. Returns, Volatility and Liquidity on the ASX.

Undisclosed vs. Disclosed Limit Orders.

David E. Allen, Alexander Shu Sing Cheng, Carole Comerton Forde and Joey Wenling Yang.

Chapter 13. Earnings Surprise and Stealth Trading.

Sugato Chakravarty, Chiraphol N. Chiyachantana, and Christine Jiang.

Chapter 14. The Impact of Inter Dealer Trading on Market Liquidity under Asymmetric Information.

Kees G. Koedijk, Mathijs A. van Dijk and Irma W. van Leeuwen.

Chapter 15. Trading Technology and Stock Market Liquidity.

A Global Perspective.

Pankaj K. Jain and William F. Johnson.

Chapter 16. Increasing the Liquidity of Shares in Chinese Companies.

Margaret Wang.

Part Three. Asset Pricing, Liquidity Risk, Merger Arbitrage, and Valuation.

Chapter 17. Stealth Trading. Which Traders' Trades Move Prices?

Sugato Chakravarty.

Chapter 18. Commonality in Liquidity.

Tarun Chordia, Richard Roll, and Avanidhar Subrahmanyam.

Chapter 19. On the Dynamics of Market Illiquidity.

Niklas Wagner.

Chapter 20. Liquidity and Returns.

The Impact of Inclusion into the S&P 500 Index.

Tarun Chordia.

Chapter 21. The Multiple Dimensions of Market Wide Liquidity.

Implications for Asset Pricing.

R. Burt Porter

Chapter 22. Managing Illiquidity.

A Hedge Fund Perspective.

Greg N. Gregoriou and François Serge Lhabitant.

Chapter 23. Liquidity Asset Pricing Model in a Segmented Equity Market

Zhian Chen and Peter Swan.

Notes.

Index.