Free Float and Volatility Effect on Stock Liquidity in Indonesia Stock Exchange
Asian Journal of Economics, Business and Accounting, Volume 22, Issue 23,
Liquidity is one of the important things in investing in the stock market. The Indonesia Stock Exchange as a regulator makes and establishes regulations in the capital market to conduct trading in an orderly, fair and efficient manner. One of the amended provisions in the regulation is regarding the free float or the percentage of the number of shares outstanding in the public with the aim of increasing the liquidity of the listed shares. In addition to free float, the risk in investing also needs to be considered. Behind a high return there is a high risk as well. High risk in the volatility of stock returns. High volatility attracts investors to invest in the stock market. Investors with risk-taking tendencies prefer this high-volatility condition because it allows them to earn higher returns, thereby increasing liquidity through the trading volume of these shares. This study involves a number of control variables that together determine market liquidity, namely Stock Return, Firm Size and Stock Price. The analysis was carried out on property and construction sector companies listed in the 2016-2020 period. The analytical method used is multiple linear regression analysis using the E-Views 10 application. The results of the analysis found that free float and volatility have a positive effect on stock liquidity, either by including or including control variables. These results indicate that information about free float and volatility is a consideration in capital market investment decisions.
- Indonesia stock exchange
- free float
- firm size and stock price
How to Cite
Jones CP. Investment Principles and Concepts (12th ed.). John Wiley and Sons Singapore Pte. Ltd; 2014.
Mahmud HZ. Market Liquidity; 2015. Investor.Id. https://investor.id/archive/likuiditas-pasar
Sutrisno B. Relationship between Volatility and Trading Volume on the Indonesia Stock Exchange. Journal of Business And Management. 2017;7:15–26.
Chan K, Chan YC, Fong WM. Free Float And Market Liquidity: A Study Of Hong Kong Government Intervention. Journal of Financial Research. 2004;27(2):179–197.
Brockman P, Chung DY, Yan X. Block ownership, trading activity, and market liquidity. Journal of Financial and Quantitative Analysis. 2009;44(6):1403–1426.
Yosra G, Sioud OBO. Ultimate ownership structure and stock liquidity: Empirical evidence from Tunisia. Studies in Economics and Finance. 2011;28(4):282–300.
Bostanci F, Kiliç S. The Effects Of Free Float Ratios On Market Performance: An Empirical Study On The Istanbul Stock Exchange. Istanbul Stock Exchange Review. 2010;12(45):1–25.
Calişkan MT, Keresteci̇oğlu S. Effects Of Free Float Ratios On Stock Prices: An Application On Ise. Doğuş niversitesi Dergisi. 2013;14(2):165–174.
Rezaei E, Tahernia A. The Relationship Between The Percentages Of Free-Float Shares And Liquidity Of Shares In The Companies Accepted In Tehran Stock Exchange. African Journal of Business Management. 2013;7(37):3790–3798.
Wang Q, Zhang J. Individual investor trading and stock liquidity. Review of Quantitative Finance and Accounting. 2015;45(3):485–508.
Ding XS, Ni Y, Zhong L. Free Float And Market Liquidity Around The World. Journal of Empirical Finance. 2016;38 (71303155):236–257.
El-Nader G. Stock Liquidity And Free Float: Evidence From The Uk. Managerial Finance. 2018;44(10):1227–1236.
Fitriani D, Iqbal S, Andayani W. The Effectiveness of Free Float in Boosting the Liquidity of the Indonesia Stock Exchange. Scientific Journal of Management. 2020;10(1):127–140.
Wang, GHK. Trading Volume , Bid – Ask Spread, and Price Volatility in Futures Markets. 2000;20(10):943–970.
Chan K, Fong WM. Trade size, order imbalance, and the volatility-volume relation. Journal of Financial Economics. 2000;57(2):247–273.
Brockman P, Chung DY. Commonality in liquidity: Evidence from an order-driven market structure. Journal of Financial Research. 2002;25(4):521–539.
Pereira JP, Zhang HH. Stock Returns And The Volatility Of Liquidity. Journal of Financial and Quantitative Analysis. 2010;45(4):1077–1110.
Kalimipalli M, Nayak S. Idiosyncratic volatility vs. liquidity? Evidence from the US corporate bond market. Journal of Financial Intermediation. 2012;21(2):217–242.
Wahyuliantini NM. The Effect of Stock Price, Stock Trading Volume, And Stock Return Volatility on Bid-Ask Spread. Journal of Management, Business Strategy And Entrepreneurship. 2015;9(2):146– 155.
Sujatmika, Suryaningsum. The Effect of Ownership Type and Geographical First Level Share Ownership on Operating Revenue Per Turn Over. Economics Bulletin. 2010;8(3):170–268.
Wyss RV. Measuring and Predicting Liquidity in Stock Market. Zurich: University of St. Gallen; 2004.
Mulyana S. Business Research Methodology for Accounting and Management. USU Press; 2011.
Wijayanto A, Wiyani W. The effect of the rupiah exchange rate, deposit interest rates and total shares traded on stock prices. Journal of Finance and Banking. 2005;9(3):884–903.
Bartov E, Bodnar G. Alternative Accounting Methods, Information Asymmetry and Liquidity: Theory and Evidence. The Accounting Review. 1996; 71(3):397–418.
Tandelillin E. Investment and Portfolio Management (1st Edition). Yogyakarta : BPFE; 2010.
Hashemijo. The Impact of Dividend Policy on Share Price Volatility in the Malaysian Stock Market. Journal of Business Studies Quarterly. 2012;4(1):111–129.
Jogiyanto H. Portfolio Theory and Investment Analysis (10th Edition). Yogyakarta : BPFE; 2016.
Amihud Y. Illiquidity And Stock Returns: Cross-Section And Time-Series Effect. Journal of Financial Markets. 2002;5(1): 31–56.
Audretsch DB, Elston JA. Does Firm Size Matter ? Evidence On The Impact Of Liquidity Constraints On Firm Investment Behavior In Germany. International Journal of Industrial Organization. 2002;20(1):1–17.
DTN Huy, VK Nhan, NTN Bich, NTP Hong, NT Chung, PQ Huy. Impacts of internal and external macroeconomic factors on firm stock price in an expansion econometric model—a case in Vietnam real estate industry, Data Science for Financial Econometrics. 2021;189-205.
DTN Huy, BTT Loan, TA Pham. Impact of selected factors on stock price: A case study of Vietcombank in Vietnam, Entrepreneurship and Sustainability. 2020;7(4).
DTN Huy. The critical analysis of limited south asian corporate governance standards after financial crisis, International Journal for Quality Research. 2015;9(4).
Brigham FE, Joel F. Houston. Fundamentals of financial management. Cengage Learning; 2021.
Sugiyono. Research Methods Quantitative, Qualitative, R and D. Bandung: CV Alfabeta; 2017.
Datar VT, Rise YN, Radcliffe R. Liquidity And Stock Returns: An Alternative Test. Journal of Financial Markets. 1998;1(2):203–219.
Biktimirov EN, Barnes T. Definitions of Return. Accounting and Finance. 2003;24–37.
Rusliati E, Farida EN. Stock Split on Liquidity and Return on Companies Listed on the IDX. Journal of Business and Accounting. 2010;12(3):161– 174.
Duy NT, Huu Phuoc NP. The Relationship between Firm Sizes and Stock Returns of Service Sector in Ho Chi Minh City Stock Exchange. Review of European Studies. 2016; 8(4):210.
Heflin, Shaw. Block holder Ownership and Market Liquidity. Journal of Financial and Quantitative Analysis. 2000;35(4):621–633.
Biswal. Free-float Sensex is a Better Index. Institute for Studies in Industrial Development. 2003;1–8.
Abstract View: 164 times
PDF Download: 76 times