Liquidity and return relationships in an emerging market

Jonathan Andrew Batten, Xuan Vo

    Research output: Contribution to journalArticleResearchpeer-review

    39 Citations (Scopus)

    Abstract

    In this paper, we investigate the relationship between liquidity and stock returns in the Vietnam stock market during the global financial crisis. Vietnam is one of a new group of frontier emerging markets referred to as CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa). We use a rich and detailed data set of firm characteristics to identify a positive relationship between liquidity and stock returns. This contradicts the negative correlation typically found in stock returns in developed markets. Our results support the proposition that when a market is not fully integrated with the global economy, a lack of liquidity will be a less important risk factor. Our findings contribute to those studies that highlight the diversification benefits from including frontier markets, which have a lower degree of integration with the global economy, in international portfolios.
    Original languageEnglish
    Pages (from-to)5 - 21
    Number of pages17
    JournalEmerging Markets Finance and Trade
    Volume50
    Issue number1
    DOIs
    Publication statusPublished - 2014

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