INVESTIGATION OF STOCK ILLIQUIDITY ON CENTRAL AND SOUTH EAST EUROPEAN MARKETS IN NAÏVE PORTFOLIO FRAMEWORK

This paper questions the existence of illiquidity premium on 8 Central and South East European stock markets. Using the ILLIQ illiquidity measure proposed by Amihud (2002), researchers investigate the liquidity of each stock. Naive portfolio diversification is applied in forming liquidity sorted por...

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Bibliographic Details
Published inEkonomska misao i praksa Vol. 22; no. 2; p. 537
Main Author Vidovic, Jelena
Format Journal Article
LanguageEnglish
Published Dubrovnik University of Dubrovnik 01.12.2013
Subjects
Asset allocation
Diversification
Emerging markets
Liquidity
New stock market listings
Portfolio diversification
Portfolio investments
Portfolio management
Portfolio performance
Rates of return
Securities markets
Stock
Stock exchanges
Studies
South East Europe
Central Europe
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Summary:This paper questions the existence of illiquidity premium on 8 Central and South East European stock markets. Using the ILLIQ illiquidity measure proposed by Amihud (2002), researchers investigate the liquidity of each stock. Naive portfolio diversification is applied in forming liquidity sorted portfolios. These portfolios were formed using daily data in the half-year period; and in the second part of the analysis, portfolios were formed using daily data within one month. Performance of these portfolios was observed in the half-year period out of the sample. This approach gave additional information pointing that each period had different set of stocks which were defined as less or more liquid. Contrary to previous researches, they could not confirm the existence of illiquidity premium on these stock markets since stock returns of illiquid portfolio and liquid portfolio do not show statistically significant difference in the case of all 8 countries and all observed portfolios.
ISSN:1330-1039
1848-963X