Title: Stock price synchronicity and stock liquidity in an emerging market

Authors: Pankaj Chaudhary

Addresses: Department of Finance and Business Economics, University of Delhi, Delhi-110021, India

Abstract: This study examines whether the stock price synchronicity (SYNCH) can influence the stock liquidity in an emerging market. The paper also assesses the impact of demonetisation on stock liquidity. This paper applies the fixed effect and random effect panel data methods to estimate the regression model. Further, the article uses the two-step dynamic panel data technique to address the possible endogeneity problem. The paper finds that the stock price synchronicity has a positive and significant association with stock liquidity. It is noticed that the higher the SYNCH, the more is the stock liquidity by using two measures of liquidity. It is also found that stock liquidity is significantly increased post demonetisation. This study attributes this phenomenon to the well-developed online banking system in India. The paper suggests that the regulators should ensure that more firm-specific information is reflected in the stock prices.

Keywords: stock price synchronicity; stock liquidity; stock illiquidity; demonetisation; emerging market.

DOI: 10.1504/GBER.2022.124629

Global Business and Economics Review, 2022 Vol.27 No.1, pp.116 - 132

Received: 06 Jun 2021
Accepted: 04 Sep 2021
Published online: 29 Jul 2022 *

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