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Stock price synchronicity and stock liquidity in an emerging market

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  • Pankaj Chaudhary

Abstract

This study examines whether the stock price synchronicity (SYNCH) can influence the stock liquidity in an emerging market. The paper also assesses the impact of demonetisation on stock liquidity. This paper applies the fixed effect and random effect panel data methods to estimate the regression model. Further, the article uses the two-step dynamic panel data technique to address the possible endogeneity problem. The paper finds that the stock price synchronicity has a positive and significant association with stock liquidity. It is noticed that the higher the SYNCH, the more is the stock liquidity by using two measures of liquidity. It is also found that stock liquidity is significantly increased post demonetisation. This study attributes this phenomenon to the well-developed online banking system in India. The paper suggests that the regulators should ensure that more firm-specific information is reflected in the stock prices.

Suggested Citation

  • Pankaj Chaudhary, 2022. "Stock price synchronicity and stock liquidity in an emerging market," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 27(1), pages 116-132.
    • Handle: RePEc:ids:gbusec:v:27:y:2022:i:1:p:116-132
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    Cited by:

    1. R. L. N. Murthy & Hardeep Singh Mundi, 2023. "Stock Return Synchronicity and Profitability: Evidence from India," Paradigm, , vol. 27(1), pages 47-59, June.

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