On the usefulness of intraday price ranges to gauge liquidity in cap-based portfolios

Abstract : We find that easy-to-observe price ranges are useful for estimating intraday liquidity. Following the literature on range-based volatility estimators, we go beyond the use of the closing price only and rely on the full range of prices. Based on high, low, opening, and closing (HLOC) prices, we show that a greater intensity in the price discovery process (as measured by the open–close range) and a higher level of price uncertainty (as captured by the High–Low range) lower ex-ante liquidity for small, mid, and large caps. Realized volatility (RV) fails to capture these effects. Although order books have become increasingly difficult to treat, there is some good news: it has never been easier to look at price ranges.
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Submitted on : Monday, July 17, 2017 - 11:31:49 AM
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Paolo Mazza, Mikael Petitjean. On the usefulness of intraday price ranges to gauge liquidity in cap-based portfolios. Economic Modelling, Elsevier, 2016, 54, pp.67--81. ⟨10.1016/j.econmod.2015.12.016⟩. ⟨hal-01562991⟩

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