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- Title
Market liquidity and volatility: Does economic policy uncertainty matter? Evidence from Asian emerging economies.
- Authors
Muzaffar, Zumara; Malik, Imran Riaz
- Abstract
This research investigates the complex interaction between liquidity and volatility while considering Economic Policy Uncertainty (EPU) as a moderating factor. Using a comprehensive dataset that incorporates various liquidity measures such as market resilience, depth, and breadth, the study examines how changes in liquidity impact volatility in four Asian incipient economies: China, Pakistan, India, and South Korea. By utilizing sophisticated econometric techniques, particularly the System Generalized Method of Moment (GMM), the findings demonstrate a statistically significant inverse relationship between liquidity and volatility. These findings imply that, within the Asian context, lower levels of volatility are correlated with higher market liquidity. By incorporating EPU into the model, the research acknowledges the significant role of economic factors in shaping market dynamics. Stakeholders, decision-makers, and investors can gain valuable insights from this analysis of variables influencing market stability in Asian emerging economies. The study's outcomes can guide policymakers in formulating strategies that promote market stability and improve market microstructure.
- Subjects
PAKISTAN; ECONOMIC conditions in Asia; ECONOMIC uncertainty; ECONOMIC policy; EMERGING markets; MARKET volatility
- Publication
PLoS ONE, 2024, Vol 19, Issue 6, p1
- ISSN
1932-6203
- Publication type
Article
- DOI
10.1371/journal.pone.0301597