Abstract
Recently, investors have been becoming more interested in market liquidity. Liquidity is regarded as a measure of a booming financial market; market participants are able to smoothly buy and sell their intended amount at a price close to the market mid-price. When discussing market liquidity in empirical studies, researchers have defined liquidity indicators that are consistent with their research objectives. However, it has not been clarified which market factors affect these indicators. Therefore, we investigated which market factors affect major liquidity indicators by using an artificial market. As a result, the four liquidity indicators Volume, Tightness, Resiliency, and Depth were found to be affected by tick size and investor strategies (fundamental, technical, and noise) among the parameters of the artificial market.
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