Open AccessMultidimensional Liquidity: Evidences from Indian Stock Market
Author(s) -
Sharad Nath Bhattacharya,
Pramit Sengupta,
Mousumi Bhattacharya,
Basav Roychoudhury
Publication year - 2016
Publication title -
applied finance letters
Language(s) - English
Resource type - Journals
eISSN - 2253-5802
pISSN - 2253-5799
DOI - 10.24135/afl.v5i2.47
Subject(s) - market liquidity , stock exchange , liquidity risk , market maker , stock market , liquidity crisis , accounting liquidity , financial economics , business , immediacy , equity (law) , monetary economics , econometrics , economics , finance , geography , philosophy , context (archaeology) , archaeology , epistemology , law , political science
Various dimensions of liquidity including breadth, depth, resiliency, tightness, immediacy are examined using BSE 500 and NIFTY 500 indices from Indian Equity market. Liquidity dynamics of the stock markets were examined using trading volume, trading probability, spread, Market Efficiency coefficient, and turnover rate as they gauge different dimensions of market liquidity. We provide evidences on the order of importance of these liquidity measures in Indian stock market using machine learning tools like Artificial Neural Network (ANN) and Random Forest (RF). Findings reveal that liquidity variables collectively explains the movements of stock markets. Both these machine learning tools performs satisfactorily in terms of mean absolute percentage error. We also evidenced lower level of liquidity in Bombay Stock Exchange (BSE) than National Stock Exchange (NSE) and findings supports the liquidity enhancement program recently initiated by BSE.