Liquidity measurement: A comparative review of the literature with a focus on high frequency


Cobandag Guloglu Z., Ekinci C. E.

JOURNAL OF ECONOMIC SURVEYS, vol.36, no.1, pp.41-74, 2022 (SSCI) identifier identifier

  • Publication Type: Article / Review
  • Volume: 36 Issue: 1
  • Publication Date: 2022
  • Doi Number: 10.1111/joes.12440
  • Journal Name: JOURNAL OF ECONOMIC SURVEYS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Geobase
  • Page Numbers: pp.41-74
  • Istanbul Technical University Affiliated: Yes

Abstract

This paper provides an exhaustive review and categorization of market liquidity measures that are used to quantify liquidity in empirical research. We review and discuss these measures in a comparative manner in terms of market, data features, computational ease, predictiveness, and potentiality. With a primary focus on high-frequency liquidity measurement, we highlight their advantages, limitations, and extensions. We conclude that high-frequency measures concentrate around bid-ask spread and limit order book, the latter offering a richer ground for analysis. Moreover, considering the recent developments in the industry such as market fragmentation, abundance of data, and improved technology, the practicality of these measures are challenged.