Evaluating Market Quality
Liquidity
Video: Measures of Liquidity
Recommended Readings
Understanding Liquidity Risk. Harper, D. (2020, April 10). Retrieved June 23, 2020, from https://www.investopedia.com/articles/trading/11/understanding-liquidity-risk.asp
How to Calculate the Bid-Ask Spread. Investopedia Staff. (2020, February 05). Retrieved June 23, 2020, from https://www.investopedia.com/articles/investing/082213/how-calculate-bidask-spread.asp
Cboe Exchange: Execution Quality Definitions. Cboe Exchange, Inc. (n.d.). Retrieved June 23, 2020, from https://certification.batstrading.com/market_data/execution_quality/definitions/
Depth of Market - DOM Shows Supply and Demand Levels for a Security. Twin, A. (2020, May 29). Retrieved June 23, 2020, from https://www.investopedia.com/terms/d/depth-of-market.asp
Resilience of market liquidity. Brandao-Marques, L. & Gelos, G. (n.d.). Retrieved June 23, 2020, from https://voxeu.org/article/resilience-market-liquidity
Check Your Understanding
Q1: Which measure of liquidity measures the actual cost of a trade?
a) Bid-ask spreadb) Effective spreadc) Market depthd) Resilience
Q2: If you want to trade a large order all at one time, which variable is going to be the most important to your decision?
a) Bid-ask spreadb) Effective spreadc) Market depthd) Resilience
Random Walk
Recommended Readings
Random Walk Theory Definition. IG. (n.d.). Retrieved June 23, 2020, from https://www.ig.com/en/glossary-trading-terms/random-walk-theory-definition
How Can Random Walk Theory Be Applied to Investing? Phung, A. (2020, April 09). Retrieved June 23, 2020, from https://www.investopedia.com/ask/answers/08/random-walk-theory.asp
Random Walk Theory - Definition, History, Implications of the Theory. Corporate Finance Institute. (2020, April 22). Retrieved June 23, 2020, from https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/what-is-the-random-walk-theory/