Liquidity of the European Indices: The Developed Versus the Emerging Markets

The study is aimed to compare liquidity of indices on the European stock markets in different stage of development. The sample consists of the blue chips indices from several European markets classified by MSCI as developed or emerging. This paper investigates statistical time-series properties of liquidity proxies calculated for indices. Additionally the principal component analysis is used to extract the main factors lying behind the liquidity dynamics as well as the dendrograms that help to illustrate potential clusters in liquidity. We find that on the developed markets the liquidity proxies for indices behave similarly, while on emerging markets some differences are observed. Additionally, we find that long-memory of liquidity series is more pronounced in the developed than in the emerging markets.