Stock Market Liquidity when Some Investors are not Working

Stock market liquidity is important for market participants, as it provides basis for making a prompt buy or sell. The existing literature, however, states that liquidity may be worsened due to presence of informed players on the market. In the following work the hypothesis about liquidity changes of stock traded on MOEX due to exclusion of various investor groups was tested. Namely, Russian (assumed to be informed) and foreign (assumed to be not informed) groups of investors were considered. It was supposed, that the absence of informed traders would improve the liquidity benchmarks. The exclusion of investor groups was done in a natural way via unique foreign holidays and time lags. For Russia holidays during which MOEX works were considered. The analysis was performed on high-frequency trading data. Results obtained partially supported the hypothesis testes. Indeed, exclusion of Russian investors from continuous trading improved liquidity measures. At the same time, exclusion of uninformed foreign investors also improved liquidity. As the extension of work and search for possible reasons of partial unconformity to hypothesis, it was suggested to extend the data sample and test the impact of the lack of news on liquidity, which happens during holidays and in hours when stock exchanges do not work simultaneously.