Paper
Journal of Derivatives & Hedge Funds (2008) 14, 265–284. doi:10.1057/jdhf.2008.18
The pattern of intraday liquidity in emerging markets: The case of the Amman Stock Exchange
Practical application The study of intraday liquidity dynamics for stocks listed in Amman Stock Exchange (ASE) is important to different parties including policy makers, investors, academics, as well as, other participants in the ASE. Characterising the behaviour of trading and liquidity components can help traders, national and foreign, in this market build their trading strategies and take their positions accordingly. Using different liquidity measures can help exchange officials and regulators better interpret and monitor the market fluctuations based on these different measures.
Muna Flaih Alabed1 and Ritab Al-Khouri2
Correspondence: Ritab Al-Khouri, Department of Economics and Finance, College of Business and Economics, PO Box 2713, Doha, Qatar. Tel: +974 5400929; Fax: +974 4851564; E-mail: r.al-khouri@qu.edu.qa
1Muna Alabed finished her MBA from Yarmouk University in 2005 and worked at the Amman Financial Authority for one year. Currently, she is working on her PhD in Economics at the University of Texas, USA. Her research interest is capital markets and portfolio management.
2Ritab Al-Khouri is a full professor of Finance at Yarmouk University in Jordan. She is currently on leave, teaching at Qatar University. She graduated from the University of Wisconsin at Madison in the USA, and has published many articles in different national and international journals. Her research interests include portfolio management, corporate finance, corporate governance and international finance.
Received 5 July 2008; Revised 5 July 2008.
Abstract
This study provides an empirical analysis of several intraday liquidity dynamics for stocks listed on the Amman Stock Exchange (ASE) using transaction data for the period from 1st January, 2005 to 31st August, 2005. We used a cross-market index, which is composed of 37 stocks, to estimate different liquidity proxies. These liquidity proxies are represented graphically to check for intraday commonalities. The analysis demonstrates that volume measures, bid–ask spread, instant trades, and number of large trades exhibit a U-shape, liquidity ratio has a smooth L-shape, while waiting-time-to-trade exhibits an inverse U-shape. The same results are observed for the case of an individual stock. The results reveal that the ASE's highest activity levels are at market open and close, whereas it is least active between 11.20 and 11.35am, suggesting a possible high information asymmetry level at open and intensive large traders' activities at close.
Keywords:
intraday liquidity, transaction data, market concentration, Amman Stock Exchange
