Hi, thank you so much for your fantastic blog! Quick question, what is the main criteria to define a stock's liquidity and how would you go about finding it? Thanks for your help! - Nico
Thanks! You can check it on most stock sites like Yahoo finance for example. Enter the stock and then under Summary you see the trading volume that day and the average trading volume. Usually it's a few hundred or thousand shares a day (depending on the share price of course), sometimes you see even zero trading. And the spread between buy and sell that your broker offers is bigger than usual because few shares are traded each day.
yes but... the bid/ask spread, and market impact, and the high historical performance when commissions were high (illiquid stocks tend to cost less, so in the old days you bought more shares/investment dollar x higher commission rates), thus the net of implementation costs likely means this is no free lunch. Retail can maybe eek out some excess. Larger investors can't
Hi, thank you so much for your fantastic blog! Quick question, what is the main criteria to define a stock's liquidity and how would you go about finding it? Thanks for your help! - Nico
Thanks! You can check it on most stock sites like Yahoo finance for example. Enter the stock and then under Summary you see the trading volume that day and the average trading volume. Usually it's a few hundred or thousand shares a day (depending on the share price of course), sometimes you see even zero trading. And the spread between buy and sell that your broker offers is bigger than usual because few shares are traded each day.
I look forward to the Onveston Letter blogs !!! They present interesting information that supplements my knowledge!!
Happy to hear that.
yes but... the bid/ask spread, and market impact, and the high historical performance when commissions were high (illiquid stocks tend to cost less, so in the old days you bought more shares/investment dollar x higher commission rates), thus the net of implementation costs likely means this is no free lunch. Retail can maybe eek out some excess. Larger investors can't