Liquidity in Iranian Stock Market, Predicting Market Depth Using Intraday Data

Document Type : applied


Postdoctoral Researcher, Faculty of Industrial and Systems Engineering, Tarbiat Modares University, Tehran, Iran


Liquidity of an asset is a key concept in financial markets. Intuitively, liquidity can be interpreted as transacting an asset rapidly and at a low cost. Despite its importance, finding a precise measure for this concept is not an easy task. In this paper, by using tick-by-tick transaction and limit order book data, we calculate VNET measure of liquidity for 16 stocks in Iranian financial market.
This measure, introduced by Engle and Lang in 2001, measures the excess volume of buy and sell that leads to a specific price movement. The results show that the market depth for different stocks is time varying and the variation is significantly correlated with volatility. This is consistent with the prediction of asymmetric information models, in which higher volatility corresponds to higher probability of the presence of informed traders.
JEL: D82, G1 
How to cite this paper: Rahimian, S. (2016). Liquidity in Iranian Stock Market, Predicting Market Depth Using Intraday Data. Quarterly Journal of Risk Modeling and Financial Engineering, 1(1), 67–113. (In Persian)


Main Subjects

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