Stock liquidity on the Warsaw Stock Exchange in the 21st century: Time-series and cross-sectional dependencies

Purpose – The aim of the study is to describe the dynamics of market liquidity and cross-sectional variation in stock liquidity on the Warsaw Stock Exchange in the years 2001-2016. Design/Methodology/approach – To measure stock liquidity three measures have been applied, namely FHT measure of transaction costs, intra-daily version of Amihud’s ILLIQ to measure price impact and trading volume to measure trading activity. Measures were computed for the monthly intervals, and to compute market-wide liquidity equally-weighted and volume-weighted averages of liquidity of all listed companies were used. Findings – The main finding is that market liquidity comoves with the Warsaw Stock Exchange Index (WIG) and the cross-sectional variation of stock liquidity increases with the decrease of market liquidity. Originality/value – To the best of the author’s knowledge, this is the first study on the cross-sectional variation in stock liquidity on the WSE.