Convenient liquidity measure for Financial markets
Trading and Market Microstructure
2014-12-17 v1
Abstract
A liquidity measure based on consideration and price range is proposed. Initially defined for daily data, Liquidity Index (LIX) can also be estimated via intraday data by using a time scaling mechanism. The link between LIX and the liquidity measure based on weighted average bid-ask spread is established. Using this liquidity measure, an elementary liquidity algebra is possible: from the estimation of the execution cost, the liquidity of a basket of instruments is obtained. A formula for the liquidity of an ETF, from the liquidity of its constituencies and the liquidity of ETF shares, is derived.
Keywords
Cite
@article{arxiv.1412.5072,
title = {Convenient liquidity measure for Financial markets},
author = {Oleh Danyliv and Bruce Bland and Daniel Nicholass},
journal= {arXiv preprint arXiv:1412.5072},
year = {2014}
}