Liquidity in Equity Markets

This book presents a novel framework for understanding and measuring liquidity in equity markets, addressing longstanding conceptual and methodological challenges that have made liquidity difficult to define and quantify. Drawing on insights from market microstructure research and the author's extensive experience in stock exchange development and operations, it examines the process of price discovery, the evolution of market structures, and the role of liquidity within exchange trading. The book develops a systematic four-category liquidity matrix and derives original measures that capture distinct dimensions of market liquidity. These measures are then tested using extensive Xetra trading data, demonstrating their practical relevance for market analysis and investment decision-making. Combining academic rigor with real-world applicability, this volume is an essential resource for investors, traders, exchange operators, regulators, policymakers, and students of finance.