Liquidity and Skewness Risk in Stock Market: Does Measurement of Liquidity Matter?
3
Issued Date
2022-01-01
Resource Type
ISSN
17383110
eISSN
20937717
Scopus ID
2-s2.0-85144918570
Journal Title
Journal of Distribution Science
Volume
20
Issue
12
Start Page
81
End Page
87
Rights Holder(s)
SCOPUS
Bibliographic Citation
Journal of Distribution Science Vol.20 No.12 (2022) , 81-87
Suggested Citation
Cheuathonghua M., Wattanatorn W., Nathaphan S. Liquidity and Skewness Risk in Stock Market: Does Measurement of Liquidity Matter?. Journal of Distribution Science Vol.20 No.12 (2022) , 81-87. 87. doi:10.15722/jds.20.12.202212.81 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/83988
Title
Liquidity and Skewness Risk in Stock Market: Does Measurement of Liquidity Matter?
Author(s)
Author's Affiliation
Other Contributor(s)
Abstract
Purpose: This study aims to explore the relationship between stock liquidity and skewness risk—tail risk (stock price crash risk) in an emerging market, in which problems on liquidity are more severe than in developed markets. Research design, data, and methodology: Based on the Thai market stock exchange over the period of 2000 to 2019, our sample include 13,462 firm-period observations. We employ a panel regression models regarding to five liquidity measures. These five liquidity measures cover three dimensions of liquidity namely the volume-based, price-based, and transaction cost-based measures for the liquidity-tail risk relationship. Results: We find a positively significant relationship between stock liquidity and tail risk in all cases. The finding here shows that the higher the stock liquidity, the larger the tail risk is. Conclusion: As the prior studies show inconclusive effect of stock liquidity on stock price crash risk, we demonstrate that mixed results found in prior studies are probably driven from the type of liquidity measure. The stock liquidity-tail risk association is present in the Stock Exchange of Thailand. The results remain the same regardless of the definition of tail risk and liquidity factors. An endogeneity issue is addressed by employing the two-stage least squares regression.