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

Author

Listed:
  • Rouetbi Emnal

    (Institut sup rieur de finance et fiscalit Sousse, Rue 18 janvier Sousse, Tunisia.)

  • Mamoghli Chokri

    (Institut des Hautes Etudes Commerciales, 2016 Carthage Presidence, Tunisia.)

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. Classification-JEL: C41; G17

Suggested Citation

  • Rouetbi Emnal & Mamoghli Chokri, 2014. "Measuring Liquidity Risk in an Emerging Market: Liquidity Adjusted Value at Risk Approach for High Frequency Data," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 40-53.
    • Handle: RePEc:eco:journ1:2014-01-6
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    References listed on IDEAS

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    Cited by:

    1. Theo Berger & Christina Uffmann, 2021. "Assessing liquidity‐adjusted risk forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(7), pages 1179-1189, November.
    2. Johannes St binger & Jens Bredthauer, 2017. "Statistical Arbitrage Pairs Trading with High-frequency Data," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 650-662.

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    More about this item

    Keywords

    Liquidity; intraday value at risk; spread; ACD; Monte Carlo simulation.;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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