Measurement of Liquidity Stocks and Cut-Off Point Determination Using Simulated Multinomial Logistic of the Average Value of the Ask-Bid Adjusted with the Average Rate of Inter-Arrival Ask-Bid on the Stock Market

13 Pages Posted: 6 Mar 2011

See all articles by Athor Subroto

Athor Subroto

School of Strategic and Global Studies; Departement of Management

Date Written: March 5, 2011

Abstract

This research offers an alternative of stock liquidity measurement using average value of ask/bid (AVA/AVB) adjusted its average inter arrival rate in Jakarta Stocks Exchange (JSX) with daily transaction data from March 2006 until August 2006. Base on the measurement from this empirical study, we found that the ratio generated from this measurement is useful to determine the soundness of a stock market. This ratio is significant to determine whether a stock is traded naturally or not. Since this ratio could make a separation between the trading behaviors, it is important for the stock market authority to consider in supervising the market. From the test case in Indonesia at the study time period, we found that about 30% of stocks in JSX are categorized as not naturally traded. We also found that stocks price in JSX intend to rise at the level of liquidity score less than one. Compared with some liquidity score of stocks in LQ45 Index as an index of most liquid stocks in JSX, there are some minor differences, about 4,4%.

Keywords: Stocks Liquidity Measurement, Stocks Liquidity Cut Off, Average Inter-Arrival Rate, Capital Market

JEL Classification: G14, C25

Suggested Citation

Subroto, Athor, Measurement of Liquidity Stocks and Cut-Off Point Determination Using Simulated Multinomial Logistic of the Average Value of the Ask-Bid Adjusted with the Average Rate of Inter-Arrival Ask-Bid on the Stock Market (March 5, 2011). Available at SSRN: https://ssrn.com/abstract=1778043 or http://dx.doi.org/10.2139/ssrn.1778043

Athor Subroto (Contact Author)

School of Strategic and Global Studies ( email )

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Departement of Management ( email )

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