Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange
International Journal of Business and Economics Research
Volume 8, Issue 6, December 2019, Pages: 389-398
Received: Sep. 27, 2019; Accepted: Nov. 4, 2019; Published: Nov. 21, 2019
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Authors
Pourakin Djarius Dieudonné Bama, Department of Management, Ouaga II University, Faculty of Economics and Management Science, Ouagadougou-Burkina Faso, Ouagadougou, Burkina Faso
Balibié Serge Auguste Bayala, Department of Management, Ouaga II University, Faculty of Economics and Management Science, Ouagadougou-Burkina Faso, Centre Africain d’Etudes Supérieures en Gestion (CESAG), Dakar, Sénégal
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Abstract
Liquidity may be evident at first glance, as it is widely debated in the literature, but regarding the question on the threshold at which a stock market is liquid, the answers are far from being evident and unanimous. This paper studies the determinants of liquidity in the West African Regional Stock Exchange through the level of float and investors behavior based on a conceptual model. The model takes into account the specificities of a market governed by players’ orders and behaviors. We analysed the scarcity of stocks and the behaviors of players based on a case study and simulation methodology. We found that investors are passive in the market, which results in under-liquidity. It can be deduced that the market is savings driven. In addition, the average time that a stock market order finds a counterpart is three to seven days. This situation is due to the scarcity of securities and / or the inability of investors to intervene in the market in a timely manner. As a result, new entrants to the market will have difficulty in offering securities, due to a lack of sufficient liquidity. In conclusion, the market liquidity depends mainly on a minimum of auctioned securities rather than investor’s participation.
Keywords
Liquidity, Behavior, Depth of the Market, Scarcity of Securities, Regional Stock Exchange
To cite this article
Pourakin Djarius Dieudonné Bama, Balibié Serge Auguste Bayala, Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange, International Journal of Business and Economics Research. Vol. 8, No. 6, 2019, pp. 389-398. doi: 10.11648/j.ijber.20190806.19
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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