Amihud Illiquidity (ILLIQ)
Computes the Amihud (2002) illiquidity measure: the average of the ratio of the absolute daily return to the dollar trading volume, scaled by one million as is convention. The intuition is that, in illiquid assets, a small volume already moves the price a lot — so the higher the ratio, the more illiquid the asset. It's one of the most used liquidity measures in research, since it needs only daily price and volume data. Enter the lists of returns in percent and dollar volumes.
Resultado
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Amihud Illiquidity (ILLIQ)
Computes the Amihud (2002) illiquidity measure: the average of the ratio of the absolute daily return to the dollar trading volume, scaled by one million as is convention. The intuition is that, in illiquid assets, a small volume already moves the price a lot — so the higher the ratio, the more illiquid the asset. It's one of the most used liquidity measures in research, since it needs only daily price and volume data. Enter the lists of returns in percent and dollar volumes.
Measuring liquidity with just price and volume
Liquidity is hard to measure because order-book data is rarely available in long series. Yakov Amihud, in 2002, proposed a clever shortcut that uses only what everyone has: daily price and volume. The idea is simple and powerful — in an illiquid asset, a small trading volume is enough to shake the price.
The measure is the average of the ratio between the size of the price move (the day's absolute return) and the dollar volume traded. When that ratio is high, it means little money moves the price a lot, the signature of illiquidity. Since the raw numbers are tiny, it's convention to multiply them by a million to make them readable.
Enter the list of daily returns in percent and that of dollar volumes, in the same order. The tool uses returns as decimals internally and returns the measure already scaled by a million, the most common reporting form. Being an average, the more days you provide, the more stable the illiquidity estimate.
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The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.