Effect of liquidity on company’s stock market performance

Valeriia Dereniuk

Diplomová práce

Anotace:

The asset liquidity plays an important role in investors’ decisions. The idea of the study is to investigate the impact of liquidity on companies’ stock return based on the stock and financial data of European companies from 2015 until 2018. Amihud’s illiquidity measure is used as a proxy for illiquidity and calculated as a weighted average of stock returns based on the traded volume. As controlling variables we used beta as a measure of systematic risk, stock risk, size of the company and book-to-market ratio. The statistical analysis was done on 152 companies that were selected for the final sample using the statistical software - Eview 11. We found that liquidity has a negative relationship with companies’ stock return. This results support the hypothesis of aversion towards illiquidity.

Abstract:

The asset liquidity plays an important role in investors’ decisions. The idea of the study is to investigate the impact of liquidity on companies’ stock return based on the stock and financial data of European companies from 2015 until 2018. Amihud’s illiquidity measure is used as a proxy for illiquidity and calculated as a weighted average of stock returns based on the traded volume. As controlling variables we used beta as a measure of systematic risk, stock risk, size of the company and book-to-market ratio. The statistical analysis was done on 152 companies that were selected for the final sample using the statistical software - Eview 11. We found that liquidity has a negative relationship with companies’ stock return. This results support the hypothesis of aversion towards illiquidity.

Klíčová slova

liquidity effect, Amihud, risk and return, stock return

Keywords

Amihud, risk and return, stock return, liquidity effect

Jazyk práce: angličtina

Datum vytvoření / odevzdání či podání práce: 10. 10. 2019

Obhajoba závěrečné práce

• Obhajoba proběhla 8. 6. 2020
• Vedoucí: Karel Brůna
• Oponent: Radek Dědeček

Vysoká škola ekonomická v Praze

Magisterský studijní program:
Finance and Accounting