Title: Analysing the effect of trading characteristics on liquidity measures – a combined approach to liquidity: evidences from Tehran Stock Exchange

Authors: Saeed Fathi; Somaye Jalali; Alireza Ajam; Omid Mirmohammad Sadeghi

Addresses: Department of Management, Faculty of Administrative Sciences and Economics, University of Isfahan, Iran ' Department of Management, Faculty of Management and Economics, P.N. University of Damavand, Iran ' Department of Finance, Faculty of Management, University of Tehran, Iran ' Department of Mechanical Engineering, Faculty of Engineering, K.N. Toosi University of Technology, Iran; Department of Management, Faculty of Management and Economics, P.N. University of Damavand, Iran

Abstract: Liquidity estimation has always been of conspicuous importance to all investors as well as risk and return. The purpose of this study is to examine the impact of trading characteristics (price, trading volume, variability, return volatility, absolute stock return, and Beedles thin trading measure) on liquidity measures (Amihud illiquidity ratio, return reversal measure, stock turnover, zero return, turnover-volatility ratio and proportional bid-ask spread) in Tehran Stock Exchange. We extend previous studies by combining different liquidity measures using TOPSIS technique and by employing a multidimensional variable, namely TOPSIS output. Results reveal both of the liquidity measures are strongly related to trading characteristics including stock turnover and zero return. Also, stock price, trading volume, and Beedles thin trading measures are the most significant factors in estimating liquidity. Different effects of different liquidity measures indicate that liquidity is a multidimensional and complex concept, and each measure reflects only one aspect of liquidity. The results of examining the influence of trading characteristics on the combined (multidimensional) liquidity measure indicate that trading characteristics are the main determinants of liquidity.

Keywords: liquidity; trading characteristics; liquidity measures; Tehran Stock Exchange.

DOI: 10.1504/AAJFA.2020.106263

Afro-Asian Journal of Finance and Accounting, 2020 Vol.10 No.2, pp.262 - 277

Received: 28 Jul 2017
Accepted: 27 Jun 2018
Published online: 02 Apr 2020 *

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