並列摘要
Market intermediaries are providers of market liquidity in quote-driven trading systems. They quote different bid and ask prices, as well as desired trading quantities according to changing environments of trading. Thus, market liquidity is influenced by the bid-ask spread and depth simultaneously. Since the increase or decrease of market liquidity cannot be sure if the bid-ask spread and depth move in the same direction, the measurement of market liquidity is a problem that needs to be solved. Chen et al.'s (2001) model gives a theoretical explanation about the same-direction movement of the spread and depth. We propose a synthetic liquidity index using depth divided by spread accordingly. This article thus examines Chen et al.'s theoretical findings empirically and measures market liquidity based on the proposed index by employing intraday stock data traded in NYSE and Nasdaq.