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Does time-varying illiquidity matter for the Indian stock market? Evidence from high-frequency data

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  • Mousumi Bhattacharya
  • Sharad Nath Bhattacharya
  • Sumit Kumar Jha

Abstract

This article examines variations in illiquidity in the Indian stock market, using intraday data. Panel regression reveals prevalent day-of-the-week, month, and holiday effects in illiquidity across industries, especially during exogenous shock periods. Illiquidity fluctuations are higher during the second and third quarters. The ranking of most illiquid stocks varies, depending on whether illiquidity is measured using an adjusted or unadjusted Amihud measure. Using pooled quantile regression, we note that illiquidity plays an important asymmetric role in explaining stock returns under up- and down-market conditions in the presence of open interest and volatility. The impact of illiquidity is more severe during periods of extreme high and low returns. JEL Classification: G10, G12

Suggested Citation

  • Mousumi Bhattacharya & Sharad Nath Bhattacharya & Sumit Kumar Jha, 2022. "Does time-varying illiquidity matter for the Indian stock market? Evidence from high-frequency data," Australian Journal of Management, Australian School of Business, vol. 47(2), pages 251-272, May.
    • Handle: RePEc:sae:ausman:v:47:y:2022:i:2:p:251-272
    DOI: 10.1177/03128962211010243
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    More about this item

    Keywords

    Asset pricing; illiquidity; liquidity; quantile regression; seasonality; stock market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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