The Relation between Asset Liquidity and Stock Liquidity in Tehran Stock Exchange

Abstract

This study investigates the relation between assets liquidity and stock liquidity in Tehran stock Exchange for the period of 2008 to 2011. This study uses liquidity criteria provided by AMIHUD and corrected by Gopalan for its high skewness, as well s differences in bids and asks as indices of stock trading liquidity. Also, it uses liquidity measures of WAL-1 and WAL-2 provided by Gopalan; assets market value to book value ratio; fixed assets ratio; receivable account ratio; inventories ratio and short term investment ratio for describing capital structure; and short term debt to total assets ratio and long term debts to total assets as indicators of asset liquidity. The results show that there is a significant positive relation between asset liquidity and stock liquidity.

Keywords

• asset liquidity
• Stock Liquidity
• AMIHOUD criteria
• the relative difference between the bid and ask prices