نقدینگی و سهام بازده در بازارهای سهام در حال ظهور

Using data for 27 emerging equity markets for the period January 1992 through December 1999, we document the behavior of liquidity in emerging markets. We find that stock returns in emerging countries are positively correlated with aggregate market liquidity as measured by turnover ratio, trading value and the turnover–volatility multiple. The results hold in both cross-sectional and time-series analyses, and are quite robust even after we control for world market beta, market capitalization and price-to-book ratio. The positive correlation between stock returns and market liquidity in a time-series analysis is consistent with the findings in developed markets. However, the positive correlation in a cross-sectional analysis appears to be at odds with market microstructure theory that has been empirically supported by studies on developed markets. Our findings regarding the cross-sectional relation between stock returns and liquidity is consistent with the view that emerging equity markets have a lower degree of integration with the global economy.

The importance of emerging equity markets in the context of investment portfolios and international diversification has received considerable attention. Six emerging markets rank among the top 20 markets in the world in terms of capitalization.1 With respect to trading value, Taiwan, Korea, and Malaysia were among the 10 most active markets during 1998. Furthermore, trading in these three markets is not concentrated in a few companies. Many emerging markets trade a large number of domestic companies. For example, as of December 2000, there were approximately 6000 companies listed in India, second only to the US, Korea has more companies listed than either France or Germany. Nevertheless, many emerging markets are still very concentrated, with high trading costs and low trading volume.2 We investigate the time-series variation in aggregate liquidity for several emerging equity markets and also examine the cross-sectional behavior of liquidity across countries. Aggregate liquidity, as opposed to the cross-sectional analysis of individual securities in traditional microstructure theory, is critical because it is related to the important issue of whether liquidity is a priced factor in global equity markets. We find that stock returns in emerging countries are positively correlated with market liquidity as measured by turnover ratio, trading value, and turnover–volatility multiple. The results hold in both cross-sectional and time-series analyses, and are quite robust even after we control for world market beta, market capitalization and price-to-book ratio.3 The positive correlation between stock returns and market liquidity in a time-series analysis is consistent with the findings for developed markets. However, the positive correlation between stock returns and liquidity in the cross-sectional analysis appears to be at odds with market microstructure theory that has been empirically supported by studies on developed markets.4 Evidently, our study identifies what seems to be a unique characteristic of stock returns in emerging equity markets. It is important to emphasize that the notion of liquidity for individual assets is quite different from the notion of liquidity of an overall equity market. While supply and demand conditions determine liquidity in both cases, the factors that characterize the supply and demand functions for individual assets within a market are different from the factors that characterize the liquidity of a country's equity market. Whereas unique individual security characteristics determine its relative liquidity, the liquidity of a country's equity market is largely determined by macroeconomic factors that are systemic to the economy.5 Moreover, the assessment of liquidity in a given equity market relative to other markets is likely to have significant implications regarding the flow of capital and hence growth and development of that market. A potential explanation for the positive correlation between liquidity and emerging stock market returns can be made from the perspective of lower level of global market integration. While Longin and Solnik (1995) report an overall increase in the correlation structure among developed markets, Bekaert and Harvey (1997) find evidence for varying degrees of integration of emerging equity markets with the world economy. If emerging markets are not fully integrated with the global economy, lack of liquidity will not function as a risk factor, and thus cross-sectional returns will not necessarily be lower for liquid markets. In this sense, our findings are supportive of the view that emerging equity markets have a lower degree of integration with the global economy. The remainder of this paper is organized in four sections. Section 2 reviews the existing literature on the relation between stock returns and market liquidity. Section 3 presents the data and descriptive statistics on 27 emerging equity markets for the period January 1992 through December 1999. We present several measures of stock market liquidity and examine their behavior over time. Section 4 presents the empirical methodology and provides a discussion and interpretation of our empirical findings. After addressing several estimation issues, we estimate the relation between liquidity and stock returns using an ordinary least squares (OLS) regression. Robustness tests are conducted using regional classifications and an estimation of a multivariate vector autoregressive (VAR). The final section provides a brief summary of the paper and some concluding remarks.

Using data for 27 emerging equity markets for the period January 1992 through December 1999, we find that stock returns in emerging countries are positively correlated with market liquidity as measured by turnover ratio, trading value as well as turnover–volatility multiple. The results hold in both cross-sectional and time-series analyses, and are quite robust even after we control for world market beta, market capitalization and price-to-book ratio. The positive correlation between stock returns and market liquidity in a time-series analysis is consistent with the findings in developed markets. However, the positive correlation in the cross-sectional analysis appears at odds with market microstructure theory that has been empirically supported by studies on developed markets. The positive correlation found between stock returns and liquidity in the cross-sectional analysis is also supportive of the view that emerging equity markets have a lower degree of integration with the global economy. The degree of integration of a given equity market with the global economy has important implications for international portfolio diversification. Bekaert and Harvey (1997) provide evidence on the degree of integration of emerging equity markets with the world economy, and note that this degree of integration varies significantly over time. An important component of our study was to examine the time-series behavior of liquidity for emerging equity markets. We document a significant rise in the overall level of liquidity of emerging equity markets over the period 1992–1999. If enhanced market liquidity is tantamount to increased economic development and hence a stronger relationship to the global economy, our findings are consistent with previous literature that suggests an increasing correlation structure between emerging equity markets and the global economy. Whereas our study focuses on long-run effects of emerging stock markets, which cannot be solely attributed to information effects from trading activity, our overall findings are consistent with the high-liquidity return premium hypothesis in stock prices, originally suggested by Ying (1966) and later extended by Gervais et al. (2001). They show that increases (decreases) in daily trading volume tend to be followed by a rise (fall) in the stock price. Their results imply that trading activity contains new information about the future evolution of stock prices. While we document a strong contemporaneous relation between measures of market liquidity and equity returns, this does not imply that there is a causal relation between the two variables. To examine if there might be a causal relation between liquidity and stock return, and what the direction of the causality might be, we conducted a Granger causality test using a multivariate VAR model for four regions pertaining to emerging equity markets. Neither of the variables examined was found to significantly Granger cause the other variables in any consistent way across all markets. Our findings have important implications to both policy makers and portfolio managers. The direct and highly significant relationship between equity returns and liquidity in emerging markets should prompt policy makers to implement policies that will enhance liquidity and promote growth. Portfolio managers on the other hand, should incorporate the liquidity characteristics of individual markets as they consider their global portfolio allocation strategies.