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1 August 2001 Research Foundation

Common Determinants of Liquidity and Trading

Market liquidity is a popular topic of research, especially because the impact of trading costs has become painfully clear to investors, but most of the research on liquidity addresses the issue from the perspective of individual securities.

  1. Tarun Chordia
  2. Richard Roll
  3. Avanidhar Subrahmanyam
Common Determinants of Liquidity and Trading View the full book (PDF)

Market liquidity is a popular topic of research, especially because the impact of trading costs has become painfully clear to investors, but most of the research on liquidity addresses the issue from the perspective of individual securities. Tarun Chordia, Richard Roll, and Avanidhar Subrahmanyam explore liquidity, instead, from a macroperspective. In particular, they document statistically that liquidity has common determinants that fluctuate through time. Moreover, the authors of this Research Foundation publication offer evidence of the identity of the factors that determine liquidity. Investors will be pleased to learn that this research is not merely an academic exercise. The authors describe clearly and thoroughly its implications for those who execute investment strategies.

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