International Journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN: 2313-626X

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 Volume 9, Issue 2 (February 2022), Pages: 72-80

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 Original Research Paper

 Title: Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis

 Author(s): Hela Ben Soltane 1, 2, *, Kamel Naoui 2, Abdulhamid Alshammari 1

 Affiliation(s):

 1College of Business Administration, University of Ha’il, Ha’il, Saudi Arabia
 2Higher School of Business of Tunis, University of Manouba, Tunisia

  Full Text - PDF          XML

 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0002-0615-4807

 Digital Object Identifier: 

 https://doi.org/10.21833/ijaas.2022.02.008

 Abstract:

The objective of this research is to investigate the relationship between illiquidity and stock prices on the Tunisian stock exchange. While previous researches tended to focus on one form of illiquidity to examine this relationship, our study unifies three forms of illiquidity at the same time. Indeed, we simultaneously consider illiquidity as systematic risk, as a characteristic of the market, and as a characteristic of the stock. The aggregate illiquidity of the market is the average of individual stock illiquidity. The illiquidity risk is the sensitivity of the stock price to illiquidity shocks. Shocks of market illiquidity are estimated by the innovations in the expected market illiquidity. Results show that investors on the Tunisian stock exchange do not require higher returns when they expect a rise of market illiquidity, whereas investors on U.S markets are compensated for higher expected market illiquidity. In addition, shocks of market illiquidity provoke a fall in stock prices of small caps, while large caps are not sensitive to market illiquidity shocks. This differs slightly from results based on U.S. data where illiquidity shocks reduce all stock prices but most notably those of small caps. Robustness tests validate our findings. Our results are consistent with previous studies which reported that the “zero-return” ratio predicts significantly the return-illiquidity relationship on emerging markets. 

 © 2022 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords: Illiquidity, Systematic risk, Stock return, Shocks, Robustness testing

 Article History: Received 17 July 2021, Received in revised form 23 October 2021, Accepted 3 December 2021

 Acknowledgment 

No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Soltane HB, Naoui K, and Alshammari A (2022). Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis. International Journal of Advanced and Applied Sciences, 9(2): 72-80

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 Figures

 Fig. 1 Fig. 2

 Tables

 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8  

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