Investigating the Relationship between Trade Duration and Liquidity: Evidence from China
Mingyue Qi 1 and
Bin Li 2
1. Institut Mines-Telecom/Telecom Ecole de Management, France
2. University of Chinese Academy of Sciences/School of Management, Beijing, China
2. University of Chinese Academy of Sciences/School of Management, Beijing, China
Abstract—This paper investigates the relationship between trade duration and liquidity of Chinese stock market. By using data of ten stocks in Chinese stock market, we employ a Weibull ACD model to decompose trade duration into two components: the expected and the unexpected duration. Then we analyze whether trade duration affects liquidity with regressions. Finally, we find that there exists a strong dependence between consecutive durations especially for liquid stocks. Both the expected and unexpected duration could explain the variation of bid-ask spread but the evidence is mixed in the depth equation. The unexpected duration contributes more to the change in liquidity than the expected duration.
Index Terms—trade duration, liquidity, spread, depth, WACD model
Cite: Mingyue Qi and Bin Li, "Investigating the Relationship between Trade Duration and Liquidity: Evidence from China," Journal of Advanced Management Science, Vol. 1, No. 3, pp. 332-337, September 2013. doi: 10.12720/joams.1.3.332-337
Index Terms—trade duration, liquidity, spread, depth, WACD model
Cite: Mingyue Qi and Bin Li, "Investigating the Relationship between Trade Duration and Liquidity: Evidence from China," Journal of Advanced Management Science, Vol. 1, No. 3, pp. 332-337, September 2013. doi: 10.12720/joams.1.3.332-337
