Liquidity And Spread In The Indian Capital Markets

Abstract

Liquidity is defined as the ability to buy and sell shares at whatever time the investor wants to and with minimal changes in the buying and selling prices. It reflects the financial health of a market. Bid Ask Spread is one of the important measures of liquidity. It is also an indicator of the financial stability of the stock markets. It arises as the compensation for various costs involved when trading in securities. These costs are classified as Order Processing Costs, Inventory Holding Costs and Adverse Selection Costs.