The Information Content of Price Movements for Intraday Liquidity Estimation
(2012) , 25 pages
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- Abstract
- This paper investigates how informative are price movements to estimate contemporaneous intraday liquidity. We regress spread, depth, dispersion and slope proxies on different price movement variables while controlling for trading activity. We estimate the relation by OLS with clustered standard errors. We also apply robust and median regression techniques. Our results suggest that liquidity proxies and price dynamics are closely related. One of the most striking observations is the following: The narrower the price range, the higher the level of liquidity. Gaps in prices are also clearly related to lower liquidity. All in all, we conclude that easy-to-observe price movements are particularly instructive when it comes to quickly evaluating the level of liquidity for large caps.
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Mazza, P., & Petitjean, M. (2012). The Information Content of Price Movements for Intraday Liquidity Estimation. https://hdl.handle.net/2078.5/207059