Intraday Patterns of Liquidity on the Warsaw Stock Exchange before and after the Outbreak of the COVID-19 Pandemic

Marcin Tuszkiewicz,Jakub Kubiczek

doi:10.3390/ijfs10010013

Marcin Tuszkiewicz, Jakub Kubiczek

Open Access

https://doi.org/10.3390/ijfs10010013

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Abstract

A highly significant feature of the stock market is its efficiency, which is associated with information efficiency. However, the liquidity of stock on the market is its essential characteristic. The inflow of information in highly liquid markets allows for the maintenance of high information efficiency. The COVID-19 pandemic affected many aspects related to stock markets, including their liquidity. The impact of the pandemic is so multidimensional that there are still areas that need to be investigated. One of them is the intraday liquidity patterns on the stock markets. Therefore, the present paper aims to verify the existence of intraday liquidity patterns on the Warsaw Stock Exchange in three periods: before, during and after the panic caused by the first wave of the COVID-19 pandemic. The results confirmed the existence of a U-shaped intraday distribution of the number of transactions and their trading. This outcome highlights the importance of the first and last minutes of a trading session. The COVID-19 pandemic resulted in the domination of WSE transactions of small individual investors who feared the loss of value of their assets, selling them on the stock exchange. In the pandemic, the average percentage change between transactions increased.

Highlights

Liquidity is one of the fundamental characteristics, which can describe a stock market.This notion is vastly discussed in the scientific literature, especially in terms of liquidity measurements (Chang et al 2018; Xu et al 2022), liquidity patterns (Angerer et al 2018; Weigerding and Hanke 2018) or information efficiency determined by market liquidity (Milos, et al 2021)
The analysis covers the period from 13 January 2020 to 15 May 2020. The choice of such an analysis period is due to the fact that the first case of the coronavirus was recorded in China at the end of 2019, the outbreak of COVID-19 was still not acknowledged as a pandemic by the World Health World Health Organization (2020) on 11 March 2020
2020, when the WIG20 index increased by 4.9%, compared to the previous day, breaking such an analysis period is due to the fact that the first case of the coronavirus was recorded in China at the end of 2019, the outbreak of COVID-19 was still not acknowledged as a pandemic by the World Health Organization (2020) on 11 March 2020

Summary

Introduction

Liquidity is one of the fundamental characteristics, which can describe a stock market This notion is vastly discussed in the scientific literature, especially in terms of liquidity measurements (Chang et al 2018; Xu et al 2022), liquidity patterns (Angerer et al 2018; Weigerding and Hanke 2018) or information efficiency determined by market liquidity (Milos, et al 2021). The advancement of information technology allowed for real-time transactions and ensured greater liquidity. It increased the market efficiency as investors were able to monitor stock prices on an ongoing basis, as well as make decisions as soon as they obtained new information (Amihud and Mendelson 1987)

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