M.Com. / Please refer to full text to view abstract

The purpose of the current paper is to explore the cross-sectional relationship between market illiquidity and market excess return on stocks traded in the Shanghai Stock Exchange(SSE)over-time; using data from monthly and yearly databases of CSMAR(China Securities Market and Accounting Research) and statistics annual Shanghai Stock Exchange from 2001.1-2012.12. We believe that the empirical tests on the stocks traded in the New York Stock Exchange (NYSE) of the well-established paper by Amihud(2002)would be potentially useful to be tested in a different setting, the SSE; in doing so, we apply the same illiquidity measure and estimating models to examine the hypotheses of the current study. In consideration of the aim of the current study, an illiquidity measure proposed by a Chinese scholar Huang (2009)is also applied in the empirical tests. Due to that Chinese stock market is still young and under development, any outcomes from the current study that are dissimilar to the ones appeared in Amihud(2002) in the sense of the effectiveness of market illiquidity have nothing to do with the utility of illiquidity theory; rather, different market characteristics should be taken into account, such as the unpredictability of frequent policy interventions on a Chinese stock market, following Wang Fang, Han Dong and Jiang Xianglin (2002).

This study examined the determinants of commercial bank liquidity in South Africa. The panel regression approach was used, applying panel data from twelve commercial banks over the period 2006 to 2016. A quantitative research method was used to investigate the relationship between bank liquidity and some microeconomic and bank-specific factors and between bank liquidity and selected macro-economic factors. The regression analysis for four liquidity ratios was conducted using the pooled ordinary least squares regression, fixed effects, random effects and the generalised methods of moments. However, the system generalised methods of moments approach was preferred over the other methods because it eliminated the problem of endogeneity. Results show that capital adequacy, size and gross domestic product have a positive and significant effect on liquidity. Loan growth and non-performing loans had a negative and significant effect on liquidity. Inflation had both a positive and a negative but an insignificant effect on liquidity. The study concluded that South African banks could enhance their liquidity positions by tightening their loan-underwriting criteria and credit policies. Banks should improve their credit risk management frameworks to be more prudent in their lending practices to improve the quality of the loan book to enhance liquidity. They also need to grow their capital levels by embarking on efficient revenue enhancements activities. Banks may also to look at their clients on an overall basis and not on transaction bases, and they need to improve non-interest revenue by introducing innovated products. The South African Reserve Bank could push for policies that might enhance capitalisation by ensuring that the sector is consolidated and thus merging smaller banks to create banks with stronger balance sheets and stronger capital base. This study contributes to the empirical research repository on the determinants of liquidity and more specifically, it identified the significant factors that affect South African commercial bank liquidity. Identifying the determinants of South African commercial bank liquidity will provide the South African Reserve Bank with insight into ways of enhancing liquidity management reforms, to improve the sector’s liquidity management practices and help to maintain a sound and liquid banking sector. / Business Management / M. Com. (Business Management)

We identify some of the factors affecting the extent of commonality in liquidity and differences between different stock exchanges around the world. With a comprehensive approach, our investigation centers on presenting evidence on the existence of commonality in liquidity, effect of using different measures of market variables on the level of commonality, factors that change the likelihood of stocks having commonality and factors explaining the different levels of commonality across markets. For the individual stock liquidity, we employ most common and reliable liquidity measures including quoted bid and ask spread, proportional spread, effective spread, proportional effective spread and percentage spread. For the market liquidity, we calculate the equal weighted and value weighted averages of the individual stock liquidity measures. Our base model of commonality of liquidity is an extension of Chordia, Roll, and Subrahmanyam (2000). Our data includes 36,457 common stocks in 46 stock exchanges in 33 countries. Our data period begins on January 2000 and covers until the end of December 2007. Our results show that 14.38% of all stocks in the world have commonality in liquidity with their markets when equally weighted market variables are used. This percentage drops to 9.76% with using value weighted market variables. After controlling for commonality in certain days of the week, we find that commonality is, in most part, uniformly distributed across days-of-the-week, almost for all countries. We also find that market factors including average spread, average price, average return, average risk, average size, legal system (common vs. civil law) and distribution of mean company size affect the likelihood of companies having commonality within their exchanges. In terms of the different levels across countries, we find that average percentage spread, level of risk, distribution of mean company size and legal system all have significant effects. Our results contribute to the literature analyzing factors that affect the level of commonality and types of companies that are likely to have commonality. Our study also has practical implications for portfolio diversification by providing evidence for possible reasons for common liquidity movements in the markets which may eventually lead to market liquidity crunches.

In the first essay, I examine the impact of the introduction of exchange traded funds (ETFs) options on the information related trading of index options. Two option pairs, NASDAQ 100 index (NDX) and ETF (QQQ, currently QQQQ ) options, and Standard and Poor's 500 index (SPX) options and S & P Depository Receipts (SPY) options, are studied. I test the hypothesis, based on the theory of Chowdhry and Nanda (1991), and Admati and Pleiderer (1988), that the information component of spreads for index options should decline after ETF options were introduced. The method of George, Kaul and Nimalendran (1991) is used to estimate the adverse selection proportion of log quoted spread and revenue from quoted spread. Primary results show that the adverse selection component of index options declines after the introduction of ETF options, and that the adverse selection component of options on index ETFs is greater than that of options on index, suggesting more informed trading for ETF options. The second essay examines whether the liquidity premium decreases as the costs of transactions decline. Nine liquidity measures are estimated to form liquidity deciles portfolios. I use several benchmark asset pricing models in fixed and rolling 36-month samples to estimate time variation liquidity premia. Surprisingly, the results show that the liquidity premium does not monotonically decline over time, and it increases in the period from 2001 to 2006. This is inconsistent with the implication of liquidity-adjusted capital asset pricing models (L-CAPM). It is likely that the liquidity premium is generated by size and book-to-market factors, rather than the liquidity factor.

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Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / This thesis aims to investigate the influence of earnings news on stock liquidity and the relationship between information asymmetry cost component and Post Earnings Announcement Drift in different equity markets. The scope of this research includes 426 firms from three countries in capital trading, the United States of America, South Africa and France. The first part of empirical work, shows that price reaction and liquidity effect are profound during short term event window length and reduce over time when the news ceases, The second part, a multivariate regression analysis which uses Generalised Method of Movement to capture both the problems of a likely presence of endogeneity between the explanatory variables and cross-stock heterogeneity, shows that the impact of earnings announcement on stock liquidity can split in two directions. The immediate effect is the shock after the news, causing stock liquidity to decrease immediately by lifting the illiquidity function upward. After the event, from the new increased position of illiquidity function, stock liquidity improves over time due to the trading volume increases and shifts the slope of illiquidity function downward. The overall effects at a point of time will be the total impact of the two side effects. And as shown in the results, the overall impact on the US and SA markets are that stock liquidity decreases while that of Euronext Paris, the stock liquidity increases. There are two types of Accounting law systems of which the common law system is used in the US and SA equity markets and the code law system used in France, the difference between the two law systems is that the information asymmetry component dominates the bid-ask spread in common law countries as in the US and SA markets while the cost of trading dominates the bid-ask spreads in code law countries such as France equity market. Finally, it is shown that there are several determinants of the PEAD, of which stock liquidity is one. Earnings news changes the stock liquidity, and therefore stock liquidity plays a role in the market response. When earnings news is released, it initially creates a gap between the informed traders and the uninformed traders, increasing the bid ask spread. Over time, this information gap decreases, however in the meantime more information on the market increases trading volume and reduces trading cost, leading to another part of the bid ask spread decreasing or stock liquidity improving. After decomposing bid ask spread into information asymmetry cost and cost of trading components, the final part of empirical iv analysis shows that information asymmetry cost component provides a partial explanation for PEAD in the Johannesburg stock exchange and Euronext Paris.

Yeung, Wing Chuen. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2004. / Includes bibliographical references (leaves 68-70). / Abstracts in English and Chinese. / Abstract --- p.i / Acknowledgement --- p.iii / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Background Study --- p.4 / Chapter 2.1 --- Liquidity Management --- p.4 / Chapter 2.2 --- Default Prediction Analysis --- p.7 / Chapter 2.3 --- The Merton Model --- p.10 / Chapter 3 --- Insolvency Model --- p.15 / Chapter 3.1 --- Insolvency Probability --- p.16 / Chapter 3.2 --- Factors Affecting Insolvency Probability --- p.19 / Chapter 3.3 --- Chapter Summary --- p.29 / Chapter 4 --- "Profitability, Liquidity and Insolvency" --- p.30 / Chapter 4.1 --- Profitability and Liquidity --- p.31 / Chapter 4.2 --- Modified Insolvency Probability --- p.34 / Chapter 4.3 --- Chapter Summary --- p.38 / Chapter 5 --- Decision on Optimal Liquidity Level --- p.39 / Chapter 5.1 --- Expected Loss in case of Insolvency --- p.40 / Chapter 5.2 --- Optimal Liquidity Level --- p.43 / Chapter 5.3 --- Numerical Example --- p.46 / Chapter 5.4 --- Chapter Summary --- p.49 / Chapter 6 --- Liquidity Strategies --- p.50 / Chapter 6.1 --- Liquidity Strategies --- p.51 / Chapter 6.2 --- Scenario Tests --- p.54 / Chapter 6.3 --- Chapter Summary --- p.59 / Chapter 7 --- Conclusions --- p.60 / Chapter A --- Fibonacci Algorithm --- p.62 / Chapter B --- Stimulation Results --- p.64 / Bibliography --- p.68

本文探討關於影響股票流通量的不同因素。數據資料包括40國家由1981年開始30年的每月數據，當中股票流通量使用股票交投量計算。本文特別關注企業管治質素對於股票流通量的影響，並透過使用封閉型控股比例及審計師報告量度企業管治質素。本文研究的另一個目的為確定國家管治質素對於股票流通量的影響。除此之外，本文亦探討經濟增長及宏觀政策穩定性對於股票流通量的影響，及股票流通量與公司財政狀況的關係。 / 透過使用固定影響面版數據迴歸分析，結果顯示股票流通量與（i）企業管治質素成正比關係；（ii）國家管治質素成正比關係；（iii）宏觀經濟發展及政策穩定性成正比關係；（iv）公司財政狀況成正比關係。投資者普遍拒絶交易一些企業管治質素差的股票以防被大股東剝奪。良好的國家管治質素能夠促進投資者信心並提高相關股票市場的交易量。較高的經濟發展及穩定的貨幣政策預期能夠提供可觀的回報並吸引投資者。良好的公司財政表現表示公司有較強的增長並吸引投資者交易相關股票。 / 透過抽選不同的情況以驗證結果的準確性，當中顯示股票交投量能夠恰當計算股票流通量，當中的迴歸結果皆十分有力。本文對影響股票流通量的不同因素提供全面的分析。政府及股票市場監管機構應將焦點放於改善市場制度以促進流通量，並減低上市公司的資本成本。將來的相關研究能夠集中於政策探討並深化有關研究。 / This thesis investigates the different factors that affect stock liquidity. The data set comprises 40 countries with monthly data for the 30 years starting from 1981. Stock liquidity is measured using the stock turnover rate. The first concern of this thesis is the determination of the manner by which the standard of corporate governance affects the stock liquidity based on the percentages of closely held shares and the reports of auditors as the proxy of corporate governance. The second concern is the ascertainment of the effects of country governance on stock liquidity. Furthermore, the current study investigates the effects of economic growth and macroeconomic policy stability on stock liquidity. In addition, the present work also determines the relationship between stock liquidity and the financial status of companies. / The results of fixed effect panel data regression show that the stock liquidity is (i) positively correlated to the corporate governance standard, (ii) positively correlated to the country governance standard, (iii) positively correlated to the macroeconomic development and policy stability, and (iv) positively correlated to the financial status of companies. Investors typically refuse to trade the stocks with poor corporate governance records to prevent minority expropriation. Moreover, better country governance improves investor confidence in trading in the respective country’s stock market. Higher economic growth and stable monetary policy attract investors by providing promising results. In addition, better financial performance by companies implies stronger growth and attracts investors to trade on the stocks of such companies. / Using different selected occasions for the validation of robustness, the stock turnover rate is confirmed to be a good proxy for stock liquidity, and the results of different regressions are strong. The current study provides a comprehensive analysis on the factors affecting stock liquidity. Governments and stock market regulators should focus on having a better institutional design to improve liquidity, which can potentially reduce the cost of equity for listed firms. The future extension on this topic can focus more on policy implication to deepen the investigation further. / Detailed summary in vernacular field only. / Detailed summary in vernacular field only. / Detailed summary in vernacular field only. / Lin, Yuk Lun. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2012. / Includes bibliographical references (leaves 58-60). / Abstracts also in Chinese. / ABSTRACT --- p.i / 摘要 --- p.iii / ACKNOWLEDGEMENTS --- p.iv / TABLE OF CONTENTS --- p.v / TABLES --- p.vii / FIGURES --- p.ix / Chapter CHAPTER 1 --- INTRODUCTION --- p.1 / Chapter CHAPTER 2 --- LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT --- p.3 / Chapter 2.a --- Literature review --- p.3 / Chapter 2.b --- Hypothesis development --- p.6 / Chapter CHAPTER 3 --- DATA DESCRIPTION AND SUMMARY STATISTICS --- p.8 / Chapter 3.a --- Firm-level time series data --- p.8 / Chapter 3.b --- Country-level time series data --- p.10 / Chapter 3.c --- Data summary --- p.11 / Chapter CHAPTER 4 --- SAMPLE SUMMARY OF DIFFERENT LAW ORIGINS --- p.12 / Chapter CHAPTER 5 --- REGRESSION MODEL AND RESULT --- p.14 / Chapter 5.a --- Stock turnover rate, corporate governance, country governance, and control variables --- p.14 / Chapter 5.b --- Amihud measure, ownership structure, country governance, and control variables --- p.19 / Chapter 5.c --- Stock turnover rate, ownership structure, squared ownership structure, country governance, and control variables --- p.21 / Chapter 5.d --- Stock turnover rate, corporate governance, country governance, interaction term of corporate and country governance, and control variables --- p.23 / Chapter 5.e --- Summary of the results --- p.24 / Chapter CHAPTER 6 --- ROBUSTNESS CHECKS --- p.26 / Chapter 6.a --- Alternative measure for stock turnover rate --- p.26 / Chapter 6.b --- Exclusion of the data on developing countries --- p.26 / Chapter 6.c --- Exclusion of the period of great volatility --- p.28 / Chapter CHAPTER 7 --- POLICY IMPLICATION --- p.30 / Chapter 7.a --- Implications for corporate governance --- p.30 / Chapter 7.b --- Implications for information disclosure --- p.31 / Chapter 7.c --- Implications for country governance --- p.32 / Chapter 7.d --- Implications for country and firm level data --- p.33 / Chapter CHAPTER 8 --- CONCLUSION --- p.34 / BIBLIOGRAPHY --- p.60