to transaction demand. The liquidity index is comp Standard and Poors Composite Ind standing. For every trading day the price relative is computed. the ratio of share volume to sha the log price relative is divide averaged over the entire month. logarithmic scale, is the monthl A detailed description of t estimates of liquidity is availa and Exchange Commission, Office entitled Analysis of the Impact NYSE Stocks. 1974 3.72 3.51 3.28 3.59 3.54 75 7976 3.77 3.96 3.84 3.92 4.07 4.19 4.29 3.73 3.76 3.90 4.24 4.06 THE LIQUIDITY INDEX IS COMPUTED BY COMPARING DAILY PRICE CHANGES FOR STANDARD AND POORS COMPOSITE INDEX TO THE DAILY TURNOVER OF NYSE SHARES OUTSTANDING. FOR EVERY TRADING DAY DURING THE MONTH THE NATURAL LOGARITHM OF THE PRICE RELATIVE IS COMPUTED. THEN THE DAILY TURNOVER RATE IS COMPUTED THE RATIO OF SHARE VOLUME TO SHARES OUTSTANDING. FINALLY, THE SQUARE OF THE LOG PRICE RELATIVE IS DIVIDED BY THE TURNOVER RATE, AND THIS QUANTITÝ AVERAGED OVER THE ENTIRE MONTH. THIS AVERAGE, RECORDED ON AN INVERTED LOGARITHMIC SCALE, IS THE MONTHLY ESTIMATE OF LIQUIDITY. |