Trading Activity as a Liquidity Measure In Indonesia Stock Exchanges

Abstract

Trading activity that is indicated by the trading volume or the turnover is the measures of stock market liquidity. This paper presents a theoretical and empirical investigation of the relation between return and trading activity. As a consequence of clientele effect that relating the holding period and bid-ask spread, this paper shows that relation between return per unit price per unit time and trading activity, has a concave form similar as the relation between return per unit price per unit time and bid-ask spread. Based on the monthly data from Indonesia Stock Exchange for the period of 2008-2013, the proposed concept has been validated.