22. Liquidity and Crises in Asian Equity Markets

  1. H. Kent Baker and
  2. Halil Kiymaz
  1. Charlie Charoenwong1,
  2. David K. Ding2 and
  3. Yung Chiang Yang3

Published Online: 23 AUG 2013

DOI: 10.1002/9781118681145.ch22

Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs

Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs

How to Cite

Charoenwong, C., Ding, D. K. and Yang, Y. C. (2013) Liquidity and Crises in Asian Equity Markets, in Market Microstructure in Emerging and Developed Markets: Price Discovery, Information Flows, and Transaction Costs (eds H. K. Baker and H. Kiymaz), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118681145.ch22

Author Information

  1. 1

    Associate Professor, Nanyang Technological University

  2. 2

    Professor, Massey University and Singapore Management University

  3. 3

    Assistant Professor, Queen's University Belfast

Publication History

  1. Published Online: 23 AUG 2013
  2. Published Print: 16 AUG 2013

ISBN Information

Print ISBN: 9781118278444

Online ISBN: 9781118681145

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Keywords:

  • asian markets;
  • emerging markets;
  • financial crisis;
  • liquidity;
  • trading activity.

Summary

This chapter presents a discussion of stock market liquidity and its relation to financial crises. It begins by defining liquidity and explaining possible measures of liquidity and then explores factors influencing liquidity. The chapter also analyzes the liquidity among 11 Asian countries. The empirical findings based on the time-series analysis show a sharp decline in stock liquidity during both the 1997?1998 Asian and the recent 2007?2008 global financial crisis. The multivariate regression results show that both stock liquidity and trading activity decrease after large market declines. Stock liquidity responds significantly to large market declines in South Korea and Taiwan, whereas it is least sensitive in Singapore. The findings show that stock trading, measured by turnover, slows after a large market decline, which affects trading activity in all markets examined, especially those of South Korea and China, but have the least effect in Singapore and Japan.