An analysis of liquidity in stock markets

Abstract

The following is a study on liquidity of the va rious stocks listed on the NSE. It has defined liquidity as the ability to trade large quantities of a stock without moving the price. The study seeks to determine the most liquid/ illiquid stocks listed on the NSE and the possible determinants of a given stock's liquidity/illiquidity. To determine the most liquid/illiquid stocks, the paper employs liquidity ratio as a measure of the stocks liquidity. The paper utilizes panel data regression and multiple regression to answer its research questions. The regressions were run using GRETL. The results suggest that Liquidity Ratio is an appropriate measure of liquidity in the NSE. The results also suggest that companies with high presence on social media as well as a high number of issued stocks tend to be more liquid. Keywords: Liquidity, Nairobi Securities Exchange