New Liquidity Measurement: Mechanical Approach (Case of Pre Opening Session on IDX)

• Main Author: Luluk Kholisoh
• Format: Article
• Language: English
• Published: Universitas Indonesia 2013-07-01
• Series: Indonesian Capital Market Review
• Online Access: http://journal.ui.ac.id/index.php/icmr/article/view/1903

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mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} </style> <![endif]--> <p class="MsoNormal" style="margin-top: 1.8pt; text-align: justify; mso-pagination: none; tab-stops: .5in; mso-layout-grid-align: none; text-autospace: none;"><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; mso-font-width: 102%;">The aim of this study is to develop a new liquidity measurement. The mechanical approach is used to measure the liquidity. This study uses trade order base that is </span><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; letter-spacing: -.05pt;">more pronounced than conventional ones. To confirm the result of this study, we use pre opening session in the term of event as Kholisoh and Hermawati (2010) and Kholisoh (2011). This study collects trade base and </span><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; mso-font-width: 103%;">order base intraday data one month period before and after pre opening session was </span><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; letter-spacing: -.1pt;">implemented with the 25 most active stocks in LQ45. This study examines the velocity (how fast the </span><span style="font-size: 12.0pt; line-height: 115%; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black;">order is executed) as new liquidity measurement<span style="letter-spacing: -.05pt;">. The result of this study confirms Kholisoh (2011), but contradicts to Kholisoh and Hermawati (2010) in </span><span style="mso-font-width: 104%;">the same event. The use of &ldquo;velocity&rdquo; as a metric of liquidity measurement is better in </span><span style="mso-font-width: 102%;">understanding the theoretical wisdom. This new liquidity measurement can cover the </span><span style="letter-spacing: -.15pt;">speed of the order to be executed in all capital market. </span></span></p> <p class="MsoNormal" style="margin-top: 11.2pt; line-height: 13.8pt; mso-line-height-rule: exactly; mso-pagination: none; mso-layout-grid-align: none; text-autospace: none;"><strong style="mso-bidi-font-weight: normal;"><span style="font-size: 12.0pt; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; letter-spacing: -.15pt;">Keywords:</span></strong><span style="font-size: 12.0pt; font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black; letter-spacing: -.15pt;"> Market microstructure, opening call, liquidity measurement, velocity</span></p>