Liquidity

RECENT NEWS
The Economic Times  Sep 16  Comment 
Foreign direct investment in China in August fell to a low not seen in at least 2-1/2 years, the Commerce Ministry said on Tuesday.
Mondo Visione  Sep 16  Comment 
Numerous studies show that stock price is an important function of liquidity, a major component of market quality. Low-priced securities are generally associated with the risk of high volatility, making them more susceptible to excessive ...
Mondo Visione  Sep 15  Comment 
Pending SEC approval, the EDGA ExchangeSM (EDGA®) will modify the behavior of Hide Not Slide (HNS) and Price Adjust orders entered with a Post Only instruction. The Exchange will also be eliminating the Single Re-Price order...
The Economic Times  Sep 9  Comment 
Unfortunately, many other emerging markets have their own set of problems. So, for the foreign investors sitting with money India is definitely the option.
The Hindu Business Line  Sep 4  Comment 
It reduces sudden shocks in the market and substantially lowers risk for participants
Wall Street Journal  Sep 3  Comment 
While a new liquidity coverage ratio approved by regulators may slightly crimp lending and bank earnings, that is a price worth paying for a more stable financial system.
Financial Times  Sep 3  Comment 
Fed Reserve says $2.5tn in high quality assets, which include Fed reserves and Treasury securities, needed to meet new rules
The Economic Times  Sep 1  Comment 
"The only reason which can explain this sharp surge in prices what we have seen over the last two-three weeks or so is liquidity."




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Liquidity

Liquidity is defined as the ability to trade large size quickly at a low cost. It is one of the most important characteristics of a market. A liquid market allows traders to implement their strategies cheaply, normally with a limited bid/ask spread. A liquid market is characterized by high volume. It is generally less volatile than an illiquid market.

Usually, you can refer to three dimensions of liquidity - time, size and cost:

• “Immediacy” refers to how quickly you can execute a trade of a given size at a given cost.

• Width refers to the cost of executing a trade of a given size, including commissions.

• Depth refers to the size of a trade that can be executed at a given cost. Width and depth are very strictly related.

A liquid market is a market where you can trade large size quickly at low cost. Liquidity refers to how quickly you can convert your assets into cash. [1] Liquidation is the conversion of assets into cash by an Investor getting rid of a position in a particular type of security. [2]

For example, a portfolio manager might decide to liquidate a position in a stock by selling all the shares of that stock held in the portfolio. [3]

1610s, from liquidus. [1] Liquid Financial sense of "capable of being converted to cash" is first recorded 1818. [2]

References

  1. Stock Investing for Dummies‬ By Paul Mladjenovic pg22 ISBN-10: 0470401141
  2. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott Accounting Professor ISBN-10: 0618176519 pg 212
  3. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. ISBN-10: 0618176519 pg212

4. http://www.bestcashloans.org.uk/

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