Measuring Liquidity in Financial Markets

This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Publication date: December 2002
ISBN: 9781451875577
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Finance , Finance , Money and Monetary Policy , Money and Monetary Policy , foreign exchange , bond , foreign exchange markets , exchange markets , Measuring Liquidity , General Financial Markets

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