Illiquidity on Eurozone countries during the 2007-08 financial crisis

Abstract

Using a sample of 11 Eurozone countries, we evaluate the impact of the financial crisis, on (il)liquidity of stock markets. We analyse some indicators of liquidity, like the bid-ask spread, turnover rate and Amihud Illiquidity measure. The financial crisis of 2007/2008 was one of the greatest financial crises since Great Depression and restructured the world of finance. There were many events during financial crisis, but was in September 2008, that crisis hit its most critical period. We use the 15th of September of 2008, the day that Lehman Brothers filed for Chapter 11 bankruptcy protection, to separate two periods of the financial crisis. His assumed that was after the bankrupting of the Lehman Brothers, that the stock markets fall deeper. We examine countries in deeper trouble (Portugal, Ireland, Italy, Greece and Spain - PIIGS) versus the other countries in the Eurozone. We concluded that the liquidity is more related with the size of the market then the fact of the country belongs to PIIGS or the others Eurozone countries