Which Market Enhances Market Efficiency by Improving Liquidity? Evidence of Market Liquidity in Relation to Returns of Stocks

IF 5.3 3区 经济学 Q1 ECONOMICS
Guy S. Liu, Jinke Li, A. Gregoriou, Y. Bo
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引用次数: 0

Abstract

Abstract Market efficiency can be enhanced by market liquidity if it promotes value creation, leading to increasing stock returns. A positive relation between liquidity and stock returns implies capital movement towards more efficient investment at a low cost for value creation. Existing studies are controversial for the relation being positive, negative, or inconclusive. With such inconsistency, this paper uses data from more than 3,200 company stocks from the UK, the United States, Germany, and China securities markets over a 10-year period to estimate the relation across these four markets, respectively. The framework of estimation is robust to outliers and macro shocks, while eliminating the issues of multicollinearity, autocorrelation, and endogeneity. The study finds some interesting results. We report strong evidence for Germany and the UK of a positive relationship between returns and liquidity. In contrast, China exhibits the opposite result, and the United States provides inconclusive evidence, possibly caused by significant diversification of value perception on liquidity. Our results imply that the German and the UK markets are more efficient than the emerging market of China because liquidity assists capital movement more efficiently. The policy implication of this research is that, for emerging stock markets, the costs of capital movement should be reduced in order to increase the efficiency of funding allocation.
哪个市场通过提高流动性来提高市场效率?与股票收益相关的市场流动性证据
摘要如果市场流动性能够促进价值创造,从而提高股票回报,那么市场效率就会得到提高。流动性和股票回报之间的正相关关系意味着资本流向更高效的投资,以低成本创造价值。现有的研究对这种关系是积极的、消极的或不确定的都存在争议。鉴于这种不一致性,本文使用了来自英国、美国、德国和中国证券市场的3200多只公司股票在10年内的数据,分别估计了这四个市场的关系。该估计框架对异常值和宏观冲击具有鲁棒性,同时消除了多重共线性、自相关和内生性问题。这项研究发现了一些有趣的结果。我们为德国和英国报告了强有力的证据,证明回报和流动性之间存在积极关系。相比之下,中国表现出相反的结果,而美国提供了不确定的证据,这可能是由于对流动性的价值感知显著多样化造成的。我们的研究结果表明,德国和英国市场比中国新兴市场更有效率,因为流动性更有效地帮助资本流动。这项研究的政策含义是,对于新兴股票市场,应该降低资本流动成本,以提高资金分配的效率。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
7.50
自引率
0.00%
发文量
16
期刊介绍: The journal Asian Economic Papers (AEP) is supported by several prominent institutions, including the Center for Sustainable Development at Columbia University in the United States. This shows that there is a strong emphasis on sustainable development within the journal's scope. Additionally, the Korea Institute for International Economic Policy in South Korea, the UN Sustainable Development Solutions Network (SDSN) in Malaysia, and the Economic Research Institute for ASEAN and East Asia in Indonesia also sponsor AEP. The articles published in AEP focus on conducting thorough and rigorous analyses of significant economic issues pertaining to specific Asian economies or the broader Asian region. The aim is to gain a deeper understanding of these issues and provide innovative solutions. By offering creative solutions to economic challenges, AEP contributes to the discourse and policymaking that impact the Asian economies and region as a whole.
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