A liquidity study on the Nasdaq OMX Stockholm exchange
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesisAlternative title
En likviditetsstudie av Nasdaq OMX Stockholm Exchange (Swedish)
As the demand for liquidity risk management has increased, the importance of comprehensive liquidity assessments of exchanges has been highlighted. This thesis investigates the liquidity on the Nasdaq OMX Stockholm exchange by using daily end of day data. The transaction cost is evaluated using the Holden model and the price impact from trading is evaluated using the Illiq model. Considering the three segments; small cap, mid cap, and large cap, the results suggest that both the transaction cost and price impact is highest for small cap stocks and lowest for large cap stocks. It is also shown that the transaction cost has decreased between 2002-03-20 and 2012-01-06 for all three segments although the cost is increasing for the small cap segment again. No decrease in price impact over this time period could be found. The data behind the results has then been used to create a combined liquidity measure with the purpose of indicating the liquidity condition of a mutual fund. The combined measure can also be used to assess whether it is price impact or transaction cost that contributes most to the liquidity cost when liquidating stocks or reveal what stocks in a portfolio that are the most illiquid. It is hence suggested as a tool for assessing large portfolios.
Place, publisher, year, edition, pages
2012. , 68 p.
Examensarbete INDEK, 2012:38
Stock liquidity, Liquidity risk, UCITS IV, Finance
IdentifiersURN: urn:nbn:se:kth:diva-100935OAI: oai:DiVA.org:kth-100935DiVA: diva2:545966
Subject / course
Master of Science in Engineering - Industrial Engineering and Management
2012-06-07, Sing Sing, Lindstedtsvägen 30, Stockholm, 21:32 (Swedish)
UppsokSocial and Behavioural Science, Law
Sörensson, Tomas, Universitetslektor