Local and Global Illiquidity Effects in the Balkans Frontier Markets
21 Pages Posted: 4 May 2013
Date Written: May 3, 2013
We study market illiquidity across eleven national markets of the Balkan Peninsula. In general the EU member countries have are more liquid markets than the non-member countries. Turkey, however, has the most liquid market, while Serbia and Bosnia are the most illiquid. Global illiquidity sourced from the US has a strong positive and statistically significant impact on the Balkans markets in nine out of eleven cases, even after controlling for a world returns factor. In contrast, local illiquidity is significant for pricing of the Balkans markets in only two instances. There are statistically significant illiquidity spillovers across the region with illiquidity from Greece and Montenegro Granger causing illiquidity in six other markets, including the world market. In contrast, Bosnia (Banja Luka), Serbia, Slovenia and Croatia appear to be most susceptible to transmissions of illiquidity from other countries of the region.
Keywords: Liquidity, Illiquidity Transmissions, Frontier Markets, Balkans
JEL Classification: G15, G12, C58
Suggested Citation: Suggested Citation