Illiquidity of Frontier Financial Market: Case of Serbia

Živković, Boško and Minović, Jelena (2010) Illiquidity of Frontier Financial Market: Case of Serbia. Panoeconomicus: naučno-stručni časopis Saveza ekonomista Vojvodine, 57 (3). pp. 349-367. ISSN 1452-595X

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Abstract

The paper explores illiquidity of the Serbian financial market for the period of 2005-2009. The financial market in Serbia is, by its type, a frontier market. We used daily data from the BELEXline index, as well as all stocks within this index in examined timeframe, provided by the Belgrade Stock Exchange. Results of this paper suggest that level of market liquidity is low and persistent in Serbia. Additionally, results confirm that time-varying illiquidity and its volatility is highly unstable in this market. This is the first paper that analyses liquidity issues in case of Serbia. It identifies different periods and shows that, in most cases, ups and downs in foreign investors’ participation leads to dramatic falls and rises in market illiquidity and its volatility.

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