Colombian Stock Market Liquidity: How Much Have We Advanced
Published
Jun 1, 2010
Almetrics
Dimensions
Google Scholar
##plugins.themes.bootstrap3.article.details##
Abstract
This article discusses the substantial progress of the Colombian stock market in terms of liquidity in the past ten years. That progress has been manifested by an important drop in the supply and demand margins during the period for most of the stocks and for the market average. It gives evidence that the merger of the three stock exchanges — Bolsa de Bogotá, Bolsa de Medellín and Bolsa de Occidente —, which led to the birth of Bolsa de Valores de Colombia on July 3, 2001, is associated with increased liquidity for a representative group of stocks. The study also explores the determinants for the liquidity of the stock market and its regularities. Among other findings, liquidity increases when there are more returns and a greater number of operations and liquidity decreases when there is volatility and financial crises in the market and in individual stocks. Possible explanations for said relations are discussed referring to the literature on the topic and to stakeholder opinions.
Keywords
liquidity, stock market, stock exchange, microstructure of marketsliquidez, mercado accionario, bolsa de valores, microestructura de mercadosliquidez, mercado de ações, bolsa de valores, microestrutura de mercados
References
Agudelo, D. (2006). Home advantage or big fish?: Do local or foreigner traders know more about the Indonesian market? Working paper. Bloomington: Indiana University.
Inversionistas o especuladores?: evidencia de burbuja en el mercado accionario colombiano 2004-2006. Administer, (2007). 9, 86-112.
Uribe, J. (2009). ¿Realidad o Sofisma?: poniendo a prueba el análisis técnico en las acciones colombianas. Cuadernos de Administración, 22 (38), 189-127.
Amihud, Y. (2002). Illiquidity and stock returns: Cross section and time-series effects. Journal of Financial Markets, 5 (1), 31-56.
Bekaert, G. and Harvey, C. (2003). Emerging markets finance. Journal of Empirical Finance, 10 (1-2), 3-57.
Bortolotti, B.; de Jong, F.; Nicodano, G. and Schindele, I. (2004). Privatization and stock market liquidity. Manuscrito no publicado, Turin: University of Turin.
Breen, W.; Hodrick, L. S. and Korajczyk, R. A. (2002). Predicting equity liquidity. Management Science, 48 (4), 470-483.
Chordia, T.; Roll, R. and Subrahmanyam, A. (2000). Commonality in liquidity. Journal of Financial Economics, 56 (1), 3-28.
Market liquidity and trading activity. (2001). Journal of Finance, 56 (2), 501-530.
Chordia, T.; Sarkar, A. and Subrahmanyam, A. (2005). An empirical analysis of stock and bond market liquidity. Review of Financial Studies, 18 (1), 85-130.
Domowitz, G. and Madhavanm, A. (2001). Liquidity, Volatility and Equity Trading Costs Across Countries and Over Time. International Finance, 4 (2), 221-255.
Ellul, A. and Pagano, M. (2005). IPO underpricing and after-market liquidity. Review of Financial Studies, 19 (2), 381-422.
Freeman, N. J. and Bartels, F. L. (2000). Portfolio investment in southeast Asia's stock markets: A survey of investor perceptions. The Asia Pacific Journal of Economic and Business, 4, 28-58.
Fujimoto, A. (2004). Macroeconomic sources of systematic liquidity. Working paper. Edmonton: Alberta University.
Glosten, L. R. and Milgrom, P. R. (1985). Bid, ask, and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics, 14 (1), 71-100.
Glosten, L. and Harris, L. (1988). Estimating the components of the bid/ask spread. Journal of Financial Economics, 21 (1), 123-142.
Goyenko, R.; Holden, C. W. and Trzcinka, C. A. (2008). Do liquidity measures measure liquidity? Working paper, Indiana University.
Grossman, S. and Miller, M. (1988). Liquidity and market structure. Journal of Finance, 43 (3), 617-633.
Harris, L. (2003). Trading and exchanges: Market microstructure for practitioners. New York: Oxford University Press.
Ho, T. and Stoll, H. R. (1981). Optimal dealer pricing under transactions and return uncertainty. Journal of Financial Economics, 9 (1), 47-73.
Hölmstrom, B. and Tirole, J. (1993). Market liquidity and performance monitoring. Journal of Political Economy, 101 (4), 678-709.
Jain, P. K. (2003). Financial market design and equity premium: Electronic versus floor trading. Working paper. Memphis: University of Memphis.
Financial market design and the equity premium: Electronic versus floor trading. (2005). The Journal of Finance, 60, 2955-2985.
Korajczyk, R. A. and Sadka, R. (2004). Are momentum profits robust to trading costs? Journal of Finance, 59 (3), 1039-1082.
Kyle, A. S. (1985). Continuous auctions and insider trading. Econometrica, 53 (6), 1315-1335.
La República (2001a). Tenemos un nuevo índice: IGBC. Recuperado el 1 de abril de 2008, de http://www.securities.com
Bolsa será una alternativa financiera para empresarios.(2001b). Recuperado el 1 de abril de 2008, de http://www.securities.com
Lesmond, D. A. (2005). Liquidity of emerging markets. Journal of Financial Economics, 77 (2), 411-452.
Ogden, J. P. and Trzcinka C. (1999). A new estimate of transaction costs. Review of Financial Studies, 12 (5), 1113-1141.
Levine, R. (2003). Stock market liquidity and economic growth: Theory and evidence. En L. Paganetto y E. S. Phelps (Eds.), Finance, research, and education, and growth (pp. 1-24). New York: Palgrave MacMillan.
Maya, C. and Torres, G. I. (2004). The unification of the Colombian stock market: A step toward efficiency - empirical evidence. Latin American Business Review, 5, 69-98.
Portafolio (2007). Mercado accionario colombiano en baja por inversiones en acciones de Ecopetrol. Ecopetrol ayudó a secar el mercado accionario. Recuperado el 30 de noviembre del 2007 deLexis Nexis.
Roll, R. (1984). A simple implicit measure of the effective bid-ask spread in an efficient market. Journal of Finance, 39 (4), 1127-1139.
Serrano, J. (2005). Mercados financieros. Bogotá: Ediciones Uniandes-Planeta.
Stoll, H. R. (2000). Friction. Journal of Finance, 55 (4), 1479-1514.
Suvalor (2001, 21 de septiembre). Colombia-Mercado accionario. Acciones: qué ha pasado en el 2001 y perspectivas. Medellín: autor.
Inversionistas o especuladores?: evidencia de burbuja en el mercado accionario colombiano 2004-2006. Administer, (2007). 9, 86-112.
Uribe, J. (2009). ¿Realidad o Sofisma?: poniendo a prueba el análisis técnico en las acciones colombianas. Cuadernos de Administración, 22 (38), 189-127.
Amihud, Y. (2002). Illiquidity and stock returns: Cross section and time-series effects. Journal of Financial Markets, 5 (1), 31-56.
Bekaert, G. and Harvey, C. (2003). Emerging markets finance. Journal of Empirical Finance, 10 (1-2), 3-57.
Bortolotti, B.; de Jong, F.; Nicodano, G. and Schindele, I. (2004). Privatization and stock market liquidity. Manuscrito no publicado, Turin: University of Turin.
Breen, W.; Hodrick, L. S. and Korajczyk, R. A. (2002). Predicting equity liquidity. Management Science, 48 (4), 470-483.
Chordia, T.; Roll, R. and Subrahmanyam, A. (2000). Commonality in liquidity. Journal of Financial Economics, 56 (1), 3-28.
Market liquidity and trading activity. (2001). Journal of Finance, 56 (2), 501-530.
Chordia, T.; Sarkar, A. and Subrahmanyam, A. (2005). An empirical analysis of stock and bond market liquidity. Review of Financial Studies, 18 (1), 85-130.
Domowitz, G. and Madhavanm, A. (2001). Liquidity, Volatility and Equity Trading Costs Across Countries and Over Time. International Finance, 4 (2), 221-255.
Ellul, A. and Pagano, M. (2005). IPO underpricing and after-market liquidity. Review of Financial Studies, 19 (2), 381-422.
Freeman, N. J. and Bartels, F. L. (2000). Portfolio investment in southeast Asia's stock markets: A survey of investor perceptions. The Asia Pacific Journal of Economic and Business, 4, 28-58.
Fujimoto, A. (2004). Macroeconomic sources of systematic liquidity. Working paper. Edmonton: Alberta University.
Glosten, L. R. and Milgrom, P. R. (1985). Bid, ask, and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics, 14 (1), 71-100.
Glosten, L. and Harris, L. (1988). Estimating the components of the bid/ask spread. Journal of Financial Economics, 21 (1), 123-142.
Goyenko, R.; Holden, C. W. and Trzcinka, C. A. (2008). Do liquidity measures measure liquidity? Working paper, Indiana University.
Grossman, S. and Miller, M. (1988). Liquidity and market structure. Journal of Finance, 43 (3), 617-633.
Harris, L. (2003). Trading and exchanges: Market microstructure for practitioners. New York: Oxford University Press.
Ho, T. and Stoll, H. R. (1981). Optimal dealer pricing under transactions and return uncertainty. Journal of Financial Economics, 9 (1), 47-73.
Hölmstrom, B. and Tirole, J. (1993). Market liquidity and performance monitoring. Journal of Political Economy, 101 (4), 678-709.
Jain, P. K. (2003). Financial market design and equity premium: Electronic versus floor trading. Working paper. Memphis: University of Memphis.
Financial market design and the equity premium: Electronic versus floor trading. (2005). The Journal of Finance, 60, 2955-2985.
Korajczyk, R. A. and Sadka, R. (2004). Are momentum profits robust to trading costs? Journal of Finance, 59 (3), 1039-1082.
Kyle, A. S. (1985). Continuous auctions and insider trading. Econometrica, 53 (6), 1315-1335.
La República (2001a). Tenemos un nuevo índice: IGBC. Recuperado el 1 de abril de 2008, de http://www.securities.com
Bolsa será una alternativa financiera para empresarios.(2001b). Recuperado el 1 de abril de 2008, de http://www.securities.com
Lesmond, D. A. (2005). Liquidity of emerging markets. Journal of Financial Economics, 77 (2), 411-452.
Ogden, J. P. and Trzcinka C. (1999). A new estimate of transaction costs. Review of Financial Studies, 12 (5), 1113-1141.
Levine, R. (2003). Stock market liquidity and economic growth: Theory and evidence. En L. Paganetto y E. S. Phelps (Eds.), Finance, research, and education, and growth (pp. 1-24). New York: Palgrave MacMillan.
Maya, C. and Torres, G. I. (2004). The unification of the Colombian stock market: A step toward efficiency - empirical evidence. Latin American Business Review, 5, 69-98.
Portafolio (2007). Mercado accionario colombiano en baja por inversiones en acciones de Ecopetrol. Ecopetrol ayudó a secar el mercado accionario. Recuperado el 30 de noviembre del 2007 deLexis Nexis.
Roll, R. (1984). A simple implicit measure of the effective bid-ask spread in an efficient market. Journal of Finance, 39 (4), 1127-1139.
Serrano, J. (2005). Mercados financieros. Bogotá: Ediciones Uniandes-Planeta.
Stoll, H. R. (2000). Friction. Journal of Finance, 55 (4), 1479-1514.
Suvalor (2001, 21 de septiembre). Colombia-Mercado accionario. Acciones: qué ha pasado en el 2001 y perspectivas. Medellín: autor.
How to Cite
Agudelo Rueda, D. A. (2010). Colombian Stock Market Liquidity: How Much Have We Advanced. Cuadernos De Administración, 23(40). https://doi.org/10.11144/Javeriana.cao23-40.lmac
Issue
Section
Artículos