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Dimensions of Market Liquidity: The Case of the Polish Stock Market

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Advances in Applied Economic Research

Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

Abstract

Liquidity in a financial market is not a one-dimensional variable but it includes several dimensions. The main aim of this paper is an empirical analysis of market liquidity dimensions on the Warsaw Stock Exchange (WSE). We investigate market depth and market tightness for the 53 WSE-listed companies divided into three size groups. The high-frequency data covers the period from January 3, 2005 to June 30, 2015. The additional goal is robustness analysis of the results obtained with respect to the whole sample period and three adjacent subsamples of equal size: the pre-crisis, crisis, and post-crisis periods. The order ratio (OR) is employed as a proxy of market depth, while market tightness is approximated using the relative spread (RS). In line with the expectations, the empirical results indicate that the OR values rather do not depend on firm size, while the RS estimates are slightly higher for small companies. Moreover, the results turn out to be robust to the choice of the sample. Furthermore, an initial research concerning interaction between liquidity dimensions on the WSE is provided by analyzing the degree of correlation between market depth and market tightness. In general, the correlation results are consistent with the literature. The majority of correlation coefficients between daily estimates of the order ratio and the relative spread indicators are not significantly different from zero.

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Acknowledgements

The present study was supported by a grant S/WI/1/2014 from Bialystok University of Technology and founded from the resources for research by Ministry of Science and Higher Education.

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Authors and Affiliations

  1. Bialystok University of Technology, Wiejska 45A, Bialystok, 15-351, Poland

    Joanna Olbrys & Michal Mursztyn

Authors
  1. Joanna Olbrys
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  2. Michal Mursztyn
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Correspondence to Joanna Olbrys .

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Editors and Affiliations

  1. Department of International Trade, Western Macedonia University of Applied Sciences, Kastoria, Greece

    Nicholas Tsounis

  2. Department of International Trade, Western Macedonia University of Applied Sciences, Kastoria, Greece

    Aspasia Vlachvei

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Olbrys, J., Mursztyn, M. (2017). Dimensions of Market Liquidity: The Case of the Polish Stock Market. In: Tsounis, N., Vlachvei, A. (eds) Advances in Applied Economic Research. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-48454-9_12

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