The Effect of Liquidity on Stock Returns: An Evidence From Pakistan

Abstract

This study aim to elucidate the association among liquidity and stock return. Ask-bid spread was used as a proxy variable to measure the liquidity. Data was taken from 10 listed companies listed on Karachi stock exchange from 2005 to 2012. Two stage regression was applied to scrutinize the data. The outcomes concluded that there is negative association among liquidity and stock return. These results are supported with (Pereira & Zhang, 2010). The main limitation of this study was time constraint so that we only incorporated ten companies. For future researcher, impact of excess return on stock sensitivity with vacation of collective liquidity can be studied.