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This study contrasts the ability of three liquidity constructs, the price-impact measure of Amihud (2002), the volume based turnover ratio, and the recently developed trading speed measure of Liu (2006) in explaining total trading costs for four large African emerging markets, Egypt, Morocco, Kenya and South Africa, as well as London and Paris. A new legal regime factor is also developed to capture the often substantial differences in returns between markets with either civil or common law origin. The evidence suggests that the Amihud construct outperforms other liquidity measures in Africa while the Amihud and Liu measures are better in London and Paris. Furthermore the incorporation of size, liquidity and legal regime valuation factors within a multifactor CAPM pricing model reveals that size and liquidity factors are significant in capturing the cross-section of returns across the sample universe.
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