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The Relationship between Market Liquidity and Market Efficiency: A Detrended Cross-Correlation Analysis (DCCA) of Tehran Stock Exchange | ||
| Iranian Journal of Economic Studies | ||
| مقاله 2، دوره 13، شماره 1 - شماره پیاپی 25، 2024، صفحه 7-24 اصل مقاله (450.26 K) | ||
| نوع مقاله: Research Paper | ||
| شناسه دیجیتال (DOI): 10.22099/ijes.2025.52425.2008 | ||
| نویسندگان | ||
| Mahdi Shahrazi* 1؛ Milad Shahrazi2؛ Zeinab Yazdani Charati2 | ||
| 1Faculty of Humanities and Social Sciences, Golestan University, Gorgan, Iran. | ||
| 2Faculty of Administrative Sciences and Economics, Mazandaran University, Babolsar, Iran. | ||
| چکیده | ||
| This study examines the dynamic relationship between market efficiency and liquidity in Tehran Stock Exchange (TSE) from March 2010 to March 2024. To achieve this, we employ the Detrended Cross-Correlation Analysis (DCCA) method using a one-year rolling window. Initially, we calculate the market efficiency index (EI) through the Detrended Fluctuation Analysis (DFA) applied to the time series of daily closing prices. Simultaneously, the moving average of daily trading volume over a one-year period is used as a proxy for market liquidity. The results indicate that the correlation between efficiency and liquidity fluctuates over time, exhibiting both positive and negative values in different periods. However, these variations remain weak, with correlation coefficients being close to zero for most time frames. This suggests that there is no clear or stable relationship between the two variables. Unlike previous studies that have suggested a significant role of liquidity in enhancing market efficiency, our findings do not support a strong link between trading volume and efficiency in the TSE. These results imply that market liquidity, as measured by trading volume, does not exhibit a strong or consistent relationship with market efficiency and vice versa. Accordingly, increasing trading volume and market liquidity does not necessarily translate into greater efficiency, and other influential factors must be considered to enhance market efficiency. | ||
| کلیدواژهها | ||
| Market efficiency؛ Liquidity؛ Trading volume؛ Detrended Cross-Correlation Analysis (DCCA)؛ Tehran Stock Exchange | ||
| مراجع | ||
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