International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Impact of the Asian Crisis on Stock Market Liquidity: Evidence from the Malaysian Stock Exchange
Engku N. Engkuchik, Halil D. Kaya

In this study, we examine the impact of the 1997 Asian Crisis on the liquidity levels in the Malaysian stock market. We find that the level of liquidity went up and the stock prices went down in the Malaysian stock exchange after the Asian Crisis started. We argue that the forced trading by the investors to quickly exit the stock market and avoid further losses had caused higher turnover rates (i.e. higher liquidity levels) and lower stock prices in this market. Our results also show that the variation in the liquidity levels went down after the crisis. These findings imply that while the sellers dominated the market after the crisis, the volume of trading did not fluctuate as much as the Pre-Crisis Period.

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