liquidity is one of the important factors of financial market as it is necessary for the investment planning as well as for the financial assets. Liquidity is assumed as the capability of the stocks, which are traded in the market. The market structure is needed to consider the lower pricing policy. As per the objective of the case study, the ask-bid is able to evaluate the cost and is able to estimate the additional cost bearing by the aggravated investors. The initial objective of this research topic is to estimate the relationship between the liquidity and the return on stock. Therefore, this study has been considered to measure the effect of liquidity on the stock prices.
In the words of Kim, Li & Zhang (2011), stocks can be measured based on future interest as well as on the confidence of the future stock exchange. The larger the stock exchange in terms of future interests, the less will be the risk of dropping the investment. It can be identified that liquidity position of stocks with the help of the balanced sale can estimate the market movement. However, Chaney (2016) argued that a model, which can admit the relationship between the liquidity and the unpredictable stock prices as the larger volatility is able to take greater risk revenue as well as the lower rate of return of the riskless assets. This outcome can be derived from the lower rate of return of the present assets as the liquidity of the market is lower. In this context, Hadavandi, Shavandi & Ghanbari (2010) supported that lower liquidity rate reduces the supply shock.
On the other hand, the essence of capital asset pricing model was helpful to establish the connection between the liquidity of the stock and the expected rate of return. In this consequence, it can be considered that impact of liquidity on the return of the stock is assumed insignificant in the short term whereas the impact increased in the long term. Moreover, Kara, Boyacioglu & Baykan (2011) cited that the concept of price gap between the bid and ask as well as the turnover rate is beneficial to understand the liquidity standards by the researcher. This concept will also used to identify the return from the market and the impact of the factors. Nevertheless, it is necessary to estimate the relationship of risk of the liquidity and the stock price.