Liquidity and Crises in Asian Equity Markets

Market Microstructure in Emerging and Developed Markets (Wiley), Forthcoming

Posted: 16 Dec 2013

See all articles by Charlie Charoenwong

Charlie Charoenwong

Nanyang Technological University (NTU)

David K. Ding

Singapore Management University - Lee Kong Chian School of Business

Yung Chiang Yang

University College Dublin (UCD) College of Business

Date Written: May 31, 2013

Abstract

This article presents a discussion of stock market liquidity and its relation to financial crises. It begins by defining liquidity and explaining possible measures of liquidity and then explores factors influencing liquidity. It also analyzes the liquidity among 11 Asian countries. The empirical findings based on the time-series analysis show a sharp decline in stock liquidity during both the 1997-1998 Asian and the recent 2007-2008 global financial crisis. The multivariate regression results show that both stock liquidity and trading activity decrease after large market declines. Stock liquidity responds significantly to large market declines in South Korea and Taiwan whereas it is least sensitive in Singapore. The findings indicate that stock trading, measured by turnover, slows down after a large market decline, which affects trading activity in all markets examined especially those of South Korea and China, but have the least effect in Singapore and Japan.

Keywords: Asian markets, emerging markets, financial crisis, liquidity, trading activity

Suggested Citation

Charoenwong, Charlie and Ding, David K. and Yang, Yung Chiang, Liquidity and Crises in Asian Equity Markets (May 31, 2013). Market Microstructure in Emerging and Developed Markets (Wiley), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2367950

Charlie Charoenwong

Nanyang Technological University (NTU) ( email )

Nanyang Business School, BF Division
S3-01c-104
Singapore, 639798
Singapore
+65 6790 4799 (Phone)
+65 6791 3697 (Fax)

David K. Ding (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
+65 6828-0245 (Phone)

Yung Chiang Yang

University College Dublin (UCD) College of Business ( email )

Belfield
Dublin, 4
Ireland

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