Modeling stock market liquidity using macroeconomic variables: Evidence from Sweden
(2021) EXTM10 20211Department of Economics
- Abstract
- This paper contributes both to investigating the relationship between the macroeconomic
environment and stock market liquidity and to reviewing existing empirical evidence related to this
relationship. We develop and examine panel data regression models for stock market liquidity
based on macroeconomic factors. Initially, we evaluate the liquidity measures and their viability in
respect of the Swedish stock market. By analyzing existing proxies for stock market liquidity
through a Principal Component analysis, we manage to obtain a variable that properly incorporates
the main features of liquidity and illiquidity. Secondly, we investigate the potential influence on
liquidity risk contributed to selected macroeconomic indicators... (More) - This paper contributes both to investigating the relationship between the macroeconomic
environment and stock market liquidity and to reviewing existing empirical evidence related to this
relationship. We develop and examine panel data regression models for stock market liquidity
based on macroeconomic factors. Initially, we evaluate the liquidity measures and their viability in
respect of the Swedish stock market. By analyzing existing proxies for stock market liquidity
through a Principal Component analysis, we manage to obtain a variable that properly incorporates
the main features of liquidity and illiquidity. Secondly, we investigate the potential influence on
liquidity risk contributed to selected macroeconomic indicators using a panel data regression using
both fixed-effects estimations and ordinary least square estimations.
We conclude that macroeconomic factors are important in explaining stock market liquidity on the
Swedish exchange. The model results differ substantially depending on explanatory variables
included. The results are aligned with previous research and suggest that changes in a limited
number of macroeconomic factors are essential in predicting stock market liquidity in Sweden. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9056457
- author
- Mannoun, Robin LU and Sjöblom, David
- supervisor
- organization
- course
- EXTM10 20211
- year
- 2021
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Stock Market Liquidity, Macroeconomy, Nasdaq Stockholm, Empirical Finance, Econometrics
- language
- English
- id
- 9056457
- date added to LUP
- 2022-03-17 10:35:19
- date last changed
- 2022-03-17 10:35:19
@misc{9056457,
abstract = {{This paper contributes both to investigating the relationship between the macroeconomic
environment and stock market liquidity and to reviewing existing empirical evidence related to this
relationship. We develop and examine panel data regression models for stock market liquidity
based on macroeconomic factors. Initially, we evaluate the liquidity measures and their viability in
respect of the Swedish stock market. By analyzing existing proxies for stock market liquidity
through a Principal Component analysis, we manage to obtain a variable that properly incorporates
the main features of liquidity and illiquidity. Secondly, we investigate the potential influence on
liquidity risk contributed to selected macroeconomic indicators using a panel data regression using
both fixed-effects estimations and ordinary least square estimations.
We conclude that macroeconomic factors are important in explaining stock market liquidity on the
Swedish exchange. The model results differ substantially depending on explanatory variables
included. The results are aligned with previous research and suggest that changes in a limited
number of macroeconomic factors are essential in predicting stock market liquidity in Sweden.}},
author = {{Mannoun, Robin and Sjöblom, David}},
language = {{eng}},
note = {{Student Paper}},
title = {{Modeling stock market liquidity using macroeconomic variables: Evidence from Sweden}},
year = {{2021}},
}