THE RELATIONSHIP BETWEEN STOCK MARKET LIQUIDITY AND EQUITY INVESTMENT RETURNS: EVIDENCE FROM UZBEKISTAN

This is a quantitative longitudinal study of the relationship between market liquidity and subsequent equity returns on the Republican Stock Exchange in Uzbekistan. It uses monthly aggregated secondary data from the daily trading records. Returns are measured as adjusted price changes and liquidity is captured by the Amihud illiquidity ratio, turnover and the % of zero trading days. A panel regression is used (with company and month fixed effects and controls for company size, market beta and return volatility) to assess whether illiquidity is associated with a positive or negative return premium as a result of trading frictions and poor price discovery. It is a methodological paper in that it lays out the research protocol and data validation framework prior to the actual extraction of the full dataset. It provides a fully transparent empirical basis for research in this frontier equity market.