Liquidity

Definition:

In context of securities, a high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease.
In context of a corporation, the ability of the corporation to meet its short-term obligations. Measured with liquidity ratios like current ratio, quick ratio, and cash ratio.
Antithesis of illiquidity.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Measurement error

Errors in measuring an explanatory variable in a regression, which leads to biases in estimated parameters.

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