The effect of liquidity risk on stock returns : the case of Amman stock exchange during (2004-2013)‎

Abstract EN

This study examines the effect of individual stock liquidity on its rate of return for the companies listed in Amman Stock Exchange over the period (2004-2013).

Our date consists of daily observations of a sample of 30 companies have been selected on a certain filtering pro cess.

Fixed effect panel regression analysis is used for estimation purposes.

The results of the study show a highly significant effect of liquidity on stock returns.

The results also indicate that all the liquidity proxies that have been used in this study including (absolute bid-ask spread, proportional bid-ask spread, volume, dinar volume, turnover, Amihud (2002) illiquidity ratio, depth, dinar depth) show statistically significant effect on individual stock returns for the com panies listed in ASE over the study period.

Amihud (2002) Illiquidity ratio and turnover rate have the most dominant effect.