Measuring Liquidity Risk in an Emerging Market: Liquidity Adjusted Value at Risk Approach for High Frequency Data
The present paper introduces an enhanced liquidity adjusted intraday value at risk measure named the LIVaR applied to a sample of listed securities in an emerging market; namely the Tunis Stock Exchange (BVMT). Very specific econometric tools were used to perform models that suit the statistical pr...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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EconJournals
2013-11-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | http://mail.econjournals.com/index.php/ijefi/article/view/611 |
| Summary: | The present paper introduces an enhanced liquidity adjusted intraday value at risk measure named the LIVaR applied to a sample of listed securities in an emerging market; namely the Tunis Stock Exchange (BVMT). Very specific econometric tools were used to perform models that suit the statistical properties of the data and to obtain a more realistic and efficient measure. This methodology was applied to intraday data. It was found that in the BVMT, the liquidity risk is very high. It represents about 25% of the total cost supported by a day trader for the most active stocks of the considered sample. It can also reach more than 40% for the less liquid ones. These results reveal how thin the Tunis stock market is.
Keywords: Liquidity; intraday value at risk; spread; ACD; Monte Carlo simulation.
JEL Classifications: C41; G17
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| ISSN: | 2146-4138 |