Measuring Liquidity Risk in an Emerging Market: Liquidity Adjusted Value at Risk Approach for High Frequency Data

Authors

  • Rouetbi Emna Institut Supérieur de Finance et Fiscalité Sousse
  • Mamoghli Chokri

Abstract

The present paper introduces an enhanced liquidity adjusted intraday value at risk measure named the LIVaR applied to a sample of listed securities in an emerging market; namely the Tunis Stock Exchange (BVMT). Very specific econometric tools were used to perform models that suit the statistical properties of the data and to obtain a more realistic and efficient measure. This methodology was applied to intraday data. It was found that in the BVMT, the liquidity risk is very high. It represents about 25% of the total cost supported by a day trader for the most active stocks of the considered sample. It can also reach more than 40% for the less liquid ones. These results reveal how thin the Tunis stock market is.

Keywords: Liquidity; intraday value at risk; spread; ACD; Monte Carlo simulation.

JEL Classifications: C41; G17

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Author Biography

Rouetbi Emna, Institut Supérieur de Finance et Fiscalité Sousse

department of finance

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Published

2013-11-16

How to Cite

Emna, R., & Chokri, M. (2013). Measuring Liquidity Risk in an Emerging Market: Liquidity Adjusted Value at Risk Approach for High Frequency Data. International Journal of Economics and Financial Issues, 4(1), 40–53. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/611

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