Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets
This study empirically examines the illiquidity premium of Taiwan stock markets and its relationship with monetary policies. We find that commonly used illiquidity measures are generally sensitive and capable of capturing market illiquidity, particularly during the most volatile periods. Evidence s...
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| Format: | Article |
| Language: | English |
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EconJournals
2019-12-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | https://www.econjournals.com/index.php/ijefi/article/view/8953 |
| _version_ | 1797911576753209344 |
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| author | Chia-Cheng Chen Chia-Li Tai Yi-Sheng Liu |
| author_facet | Chia-Cheng Chen Chia-Li Tai Yi-Sheng Liu |
| author_sort | Chia-Cheng Chen |
| collection | DOAJ |
| description |
This study empirically examines the illiquidity premium of Taiwan stock markets and its relationship with monetary policies. We find that commonly used illiquidity measures are generally sensitive and capable of capturing market illiquidity, particularly during the most volatile periods. Evidence shows that unconditional illiquidity is significantly priced across three illiquidity measures during the sample period. Aggregate market illiquidity innovations are noticeably affected by monetary policies. The results of Granger causality tests reveal that expansive monetary policy improves market illiquidity, whereas restrictive policy adversely affects market liquidity.
Keywords: Illiquidity; illiquidity premium; monetary policy; asset pricing; Granger's causality tests
JEL Classifications: G11, G12, G15
DOI: https://doi.org/10.32479/ijefi.8953
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| first_indexed | 2024-04-10T11:42:46Z |
| format | Article |
| id | doaj.art-410ab63d6eb242c9832b92507db55f40 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T11:42:46Z |
| publishDate | 2019-12-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-410ab63d6eb242c9832b92507db55f402023-02-15T16:17:28ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382019-12-011014294Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock MarketsChia-Cheng ChenChia-Li TaiYi-Sheng Liu This study empirically examines the illiquidity premium of Taiwan stock markets and its relationship with monetary policies. We find that commonly used illiquidity measures are generally sensitive and capable of capturing market illiquidity, particularly during the most volatile periods. Evidence shows that unconditional illiquidity is significantly priced across three illiquidity measures during the sample period. Aggregate market illiquidity innovations are noticeably affected by monetary policies. The results of Granger causality tests reveal that expansive monetary policy improves market illiquidity, whereas restrictive policy adversely affects market liquidity. Keywords: Illiquidity; illiquidity premium; monetary policy; asset pricing; Granger's causality tests JEL Classifications: G11, G12, G15 DOI: https://doi.org/10.32479/ijefi.8953 https://www.econjournals.com/index.php/ijefi/article/view/8953 |
| spellingShingle | Chia-Cheng Chen Chia-Li Tai Yi-Sheng Liu Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets International Journal of Economics and Financial Issues |
| title | Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets |
| title_full | Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets |
| title_fullStr | Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets |
| title_full_unstemmed | Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets |
| title_short | Illiquidity Premium and Monetary Conditions in Emerging Markets: An Empirical Examination of Taiwan Stock Markets |
| title_sort | illiquidity premium and monetary conditions in emerging markets an empirical examination of taiwan stock markets |
| url | https://www.econjournals.com/index.php/ijefi/article/view/8953 |
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