اندازه گیری نقدینگی در بازارهای مرزی

Frontier markets which are countries that have not yet reached emerging market status, have been shown to provide diversification benefits for international investors. However, many stocks in these markets are thinly traded so liquidity is an important consideration. We investigate which liquidity proxies best measure the actual cost of trading in 19 frontier markets that can be accessed by foreign investors. We find the Gibbs, Amihud, and Amivest proxies have the largest correlation with liquidity benchmarks, while the FHT measure provides the best measure of the magnitude of actual transaction costs.

Frontier markets are attracting increased attention from investors and researchers. These markets, which are less developed than emerging markets, have “low integration with the world market, and thereby offer significant diversification benefits.” (Berger et al. (2011, p. 227). However, frontier markets are relatively illiquid. Marshall et al. (2012a) show spreads are, on average, over two and a half times larger in frontier markets than in the U.S. Correctly measuring and accounting for liquidity is clearly an important issue in frontier market research. We adopt a similar approach to Goyenko et al. (2009) and Fong et al. (2011) and run “horse races” between popular liquidity proxies in frontier markets to determine which measures have the largest correlations and lowest root mean squared errors with high frequency liquidity benchmarks. As Goyenko et al. (2009) note, studies often consider issues like the link between liquidity and returns using a particular liquidity proxy, without first verifying that the proxy in question is an accurate measure of liquidity. These authors note that tick data availability is a contributing factor. They state (p. 153) “in many countries transaction data are not available at all.”

Frontier markets which are countries that have not been given “emerging markets” status, have been shown to offer diversification benefits to investors. This has resulted in increased attention for these markets by researchers, and their accessibility to investors has led to an increase in the funds being allocated to these countries by the investment community. However, relatively little is known about many important aspects of these markets. Our paper documents which liquidity proxies best measure the actual cost of transacting in frontier markets. These markets are relatively illiquid so it is important that researchers accurately measure liquidity in their work. We form effective spread, quoted spread, and price impact transaction cost benchmarks from high frequency data for 19 frontier markets and then conduct horse races of various liquidity proxies including “Roll” from Roll (1984), “Gibbs” from Hasbrouck, 2004 and Hasbrouck, 2009, “Zeros” and “Zeros2” from Lesmond et al. (1999), “FHT” from Fong et al. (2011), “Amihud” from Amihud (2002), “Amivest” from Amihud et al. (1997), and “Past Stam” from Pástor and Stambaugh (2003). We also convert the spread proxies, such as “Roll” to price impact proxies by dividing by average daily dollar volume following Goyenko et al. (2009).