• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Inez. Chan

    • Abstracting/ Indexing:  Crossref, CNKI, EBSCO

    • Article Processing Charge (APC): 500 USD

    • E-mail: ijtef.editorial.office@gmail.com

HOME > Archive > 2011 > Volume 2 Number 3 (Jun. 2011) >
IJTEF 2011 Vol.2(3): 185-193 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2011.V2.101

Liquidity Cost Determinants in the Saudi Market

Ahmed Alzahrani

Abstract—this paper examines liquidity as measured by both price impact and bid-ask spread. Liquidity determinants of large trades "block trades" in the Saudi market are examined using 124 companies that comprise all listed firms in the market. We use high frequency intraday data for the period 2005-2008 to provide out of sample evidence related to liquidity and information asymmetry. Bid-ask spread as a measure of liquidity was decomposed, using the model of Huang and Stoll (1997) to infer the information asymmetry patterns in the market. We use quoted spread (QBAS), relative spread (RBAS) and effective spread (EBAS) as three proxies for liquidity in the market. We find a price impact asymmetry between buyer-initiated block trades and seller-initiated block trades. Seller of block trades in the Saudi market pay higher liquidity premium than buyers of block trades. Our results provide new evidence from an order-driven market that has low degree of institutional investors and higher concentration of ownership.

Index Terms—Liquidity, price impact, Bid-ask spread block trades, Saudi stock market, information asymmetry.

Ahmed Alzahrani is with the Assistant Professor of Finance.Institute of Public Administration. P. O Box. 205 Riyadh (email: Zahraniaa@ipa.edu.sa; Tel: +966 55 718 2842).

[PDF]

Cite:Ahmed Alzahrani, "Liquidity Cost Determinants in the Saudi Market," International Journal of Trade, Economics and Finance vol.2, no.3, pp. 185-193, 2011.

PREVIOUS PAPER
The Correlation in the Global Context of Financial Markets and the Evolution of Emerging Market of Romania Through the Bucharest Stock Exchange
NEXT PAPER
Training System for Education Industry-An Outline

Copyright © 2008-2024. International Journal of Trade, Economics and Finance. All rights reserved.
E-mail: ijtef.editorial.office@gmail.com