Homogeneous Liquidity Pattern Across Equity Markets

Abstract

When exchanges are compared this is often done on the basis of the total turnover and market cap of the exchanges. In spite of great variations between individual exchanges in the total market cap and turnover, we will demonstrate that exchanges are not different when isolating the effect of the number of companies and their market caps.

The following must therefore be taken in view 1) The turnover on all exchanges is highly concentrated on a few major companies. Approx. 90 per cent of the turnover on the different exchanges stem from approx. 10 per cent of the listed companies. 2) All exchanges have a 'heavy tail' of companies with low turnover rates. Deviations in the published and total turnover rates on the different exchanges therefore largely derive from differences in the turnover rates among the bluechip companies only, as they weight the most in general and overall calculations. 3) All exchanges have relatively low turnover rates for small cap companies. The liquidity of small and mid-sized Danish companies is by far equal to London and Helsinki, but is slightly lower than the liquidity on the two other NOREX exchanges. The differences to the two NOREX exchanges in Oslo and Stockholm, respectively, must be ascribed to factors such as tax rules, financing systems, investor mix and the share investment culture in general.

Keywords: exchange markets, hybrid markets, liquidity, cross border patterns

JEL Classification: G10