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A new measure of liquidity

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  • Yongxiang Wang
  • Weixing Wu

Abstract

We propose a new measure of market liquidity based on the investors' optimal searching behaviour. Thus, we add a wealth filter on Pagano (1989)'s measure of liquidity to build the strong tie between endogenous market participation and investor wealth, as has been documented by empirical works.

Suggested Citation

  • Yongxiang Wang & Weixing Wu, 2007. "A new measure of liquidity," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 817-820.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:11:p:817-820
    DOI: 10.1080/13504850600606075
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    References listed on IDEAS

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    1. Marco Pagano, 1989. "Endogenous Market Thinness and Stock Price Volatility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 56(2), pages 269-287.
    2. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, vol. 29(1), pages 97-112, March.
    3. Alon Brav & George M. Constantinides & Christopher C. Geczy, 2002. "Asset Pricing with Heterogeneous Consumers and Limited Participation: Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 793-824, August.
    4. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
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