Skip to main content

Seminar: Some aspects of liquidity of stocks in the Indian stock market

Speaker :Dr.Devlina Chatterjee
Indian Institute of Science Bangalore

Background of the Speaker:

Devlina Chatterjee got her BTech in Agricultural Engineering from IIT Kharagpur in 1989. She subsequently got a PGDM (Agribusiness) from IIM Ahmedabad, MS degrees from Penn State University (Agricultural Engineering and Agricultural Economics), and her PhD in Management Studies from IISc Bangalore in 2010. She also worked in industry for a total of eight years at organizations like IFCI, New Delhi; GE Capital, Bangalore; and Antrix Corporation, Department of Space, Bangalore. Her work experience in these organizations has included evaluation of project proposals, statistical analyses of credit card business data, and contractual negotiations in the space image marketing business.

The seminar:
Dr. Chatterjee began by stating the focus of her study, the liquidity of individual stocks traded in electronic market. She went on to quote Black and Kyle to elaborate on liquidity. According to Black, a market is said to be liquid if it is continuous and efficient. Kyle gave the transactional properties of such a liquid market as tightness, depth and resilience.
As Dr. Chatterjee told, it is difficult to quantify the multidimensional nature of liquidity and a solution to this, forms the focus of her paper. Her paper delves into this by finding the relation between the various proxies which can be used to quantitatively describe liquidity.

She utilised factor analysis and survival analysis to test two models, one which measures the various macro and micro proxies to find the factors which would help quantify liquidity and second, which finds how long it takes for given order to be executed.
The data for this analysis was taken from NSE in two time intervals and covered 124 and 127 stocks in the two intervals respectively.

In the first model, the multi-dimensional nature of liquidity was studied first through factor analysis of eleven commonly used liquidity proxies – trading volume, turnover, frequency of trading, turnover ratio, price range, liquidity ratio, relative bid ask spread, order depth, market depth, immediacy, price elasticity of buy/sell. The study revealed that across two different market conditions, five factors emerged consistently: depth, spread, volume, price elasticity and relative activity. Thus the 3 transactional properties as stated by Kyle are verified.

In the second model, execution probabilities of limit orders were studied using logistic models and survival analysis. The covariates used in the analysis were price premium, volatility, relative bid-ask spread, order imbalance, trading activity, depth, relative activity in script, last traded price of stock, short term changes in trading activity, time of day and day of week.
In related prior studies, the history of the entire limit order book had been reconstructed using high-frequency data and heavy computation. Here, using much less data, the idea of hypothetical orders, and interval censoring, most appropriate distribution of survival times were obtained. The covariates which were found to determine these were price premium, closing price, log of depth, volatility, relative activity and firm order size.
Finally Dr.Chatterjee closed the presentation by observing that, both the models developed in this study made good out-of-sample predictions as well.
The seminar was wrapped up with a free-wheeling discussion between Dr. Chaterjee and the esteemed faculty of IME Dept., which churned out some interesting perspectives and left the attendees with many issues to mull over.

Contributed by:
ArpitaPandey
PR & Media Cell,
MBA, IME Dept
IIT Kanpur

Comments

Popular posts from this blog

The Dawn of A New Beginning - MBA Batch 2017-19

“Opportunities multiply as they are seized.” -Sun Tzu




‘I am an IITian’, even after two months here at IIT Kanpur this one line still fills our heart with excitement. Each one among the 54 students here who have started the journey into the MBA programme of IIT Kanpur, batch of 2017-19, feels that pride and with that equally realizes the responsibility it carries.
We started our journey here on 20th July. Meeting our batch mates for the first time still feels thrilling. Though we knew each other through the whatsapp/facebook group that was created by our seniors to make our registration process as smooth as possible. We were given several assignments before the registration to give us an inkling of the idea of how life at IIT Kanpur is going to be. Assignments were planned in a way such that we get a hands-on experience on case studies, presentations, group activities and article reading. We began burning the midnight oil as a precursor to actually doing it, and how! These assignments u…

TIPS FROM TOP - Strategic Decisions: Dynamic talents in Work Places by Mrs. Kiran Bhatia Tandon, Ex- Talent Acquisition Head, Stryker

RECRUPTION - TRUE DISRUPTION IN RECRUITMENT!


“I am convinced that nothing we do is more important than hiring and developing people. At the end of the day you bet on people, not on strategies.” - Lawrence Bossidy, GE
Human resource is an asset on which companies wager immensely. To talk on this prevailing topic, DIME at IIT Kanpur hosted Ms. Kiran Bhatia Tandon, Ex-Head, Talent Acquisition, Stryker. In her career, spanning over a decade, she has had experiences across diverse industries from Automobile to E-Commerce giving her a bird’s eye perspective of the industry. As charismatic as you get, Ms. Kiran, started off with asking us on the topics we wanted her to discuss upon, keeping the interaction open and filled with candour.
While discussing the difference, she experienced in Automobile and Ecommerce, she shared an anecdote which implied that it is always important for an HR Manager to understand the mind-set of an employee with a substantially larger earning potential than their own…

Tips from Top - "Various dimensions of leadership." Mr Amit Kasliwal, India Head - Corporate Sales, Ford India.

Leadership is one of the most desired traits for success in life and MBA students at IIT Kanpur were fortunate to get a fresh perspective on the topic from the top echelon of corporate world, when Mr Amit Kasliwal, India head of corporate sales at Ford India visited the campus to interact with the students.

Sir described leadership as the zeal to identify and solve problems. Citing an example, sir said that India has a myriad of problems and out of those; transportation was one of the major issues. Ford is dedicated to solve this problem. Talking specifically about the corporate sales department, he told that by selling cars to taxi operators, they created entrepreneurs, thereby solving the problem of job creation at that level.   
Further describing leadership, sir claimed that a leader must have a long term view, and should be enthusiastic about other’s agenda, thereby creating opportunities and ‘win-win’ situations. According to sir, and rightly so, sustainable leadership can be …