Open AccessCloser View at the Stock Market Liquidity: A Literature Review
Author(s) -
Gaurav Kumar,
A. K. Misra
Publication year - 2015
Publication title -
asian journal of finance and accounting
Language(s) - English
Resource type - Journals
ISSN - 1946-052X
DOI - 10.5296/ajfa.v7i2.8136
Subject(s) - market liquidity , liquidity crisis , liquidity risk , dividend , business , market maker , financial economics , stock (firearms) , economics , valuation (finance) , accounting liquidity , capital market , stock market , monetary economics , finance , mechanical engineering , paleontology , horse , biology , engineering
Liquidity is said to be the lifeblood of stock markets. It has prominent implications for traders, regulators, stock exchanges and the listed firms. In recent years a huge amount of literature has emerged that deals with liquidity. This article classifies and organises the literature and provides a critical review of the frameworks currently available for modelling liquidity and its macroeconomic and firm specific drivers. Commonality and intraday behaviour of liquidity in various markets is discussed under the umbrella of market microstructures. Subsequently, liquidity risk as a factor in Asset pricing is analysed taking various models in to consideration. Finally, the study reviewed the impact of liquidity on corporate finance decisions viz. dividends, firm valuation, stock split, capital structure etc.