Liquidity Measurement in Frontier Markets

26 Pages Posted: 30 Oct 2012

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Auckland University of Technology

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: October 30, 2012

Abstract

Frontier markets, which are countries that have not yet reached emerging market status, have been shown to provide diversification benefits for international investors. However, many stocks in these markets are thinly traded so liquidity is an important consideration. We investigate which liquidity proxies best measure the actual cost of trading in 19 frontier markets that can be accessed by foreign investors. We find that the Gibbs, Amihud, and Amivest proxies have the largest correlation with liquidity benchmarks, while the FHT measure provides the best measure of the magnitude of actual transaction costs.

Keywords: frontier market, liquidity proxy, transaction cost

JEL Classification: G12, G15

Suggested Citation

Marshall, Ben R. and Nguyen, Nhut H. and Visaltanachoti, Nuttawat, Liquidity Measurement in Frontier Markets (October 30, 2012). Available at SSRN: https://ssrn.com/abstract=2168548 or http://dx.doi.org/10.2139/ssrn.2168548

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

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Nhut H. Nguyen

Auckland University of Technology ( email )

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Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
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