Trading Liquidity Analysis

WHY SHOULD YOU ANALYZE YOUR STOCK'S LIQUIDITY? Statistically, liquidity is one of the most important factors in determining a firm's cost of capital. By objectively analyzing your liquidity, you can determine if your stock is as liquid as it should be based on its unique characteristics and gain insight into why your stock may be mispriced. Looking at liquidity helps you measure the impact of stock splits, earnings announcements and analyst recommendations. DeMarche analysis also provides insight into how market cycles or phases affect your stock's liquidity.

Liquidity is defined as the ease with which cash can be converted to an investment in a stock or vice versa. The market demands compensation for illiquidity in the form of larger price concession or higher expected rate of return. DeMarche uses trading volume, share turnover and price concession to measure your liquidity. We then compare your stock to a broad cross-section of publicly-traded companies, compare it to your DeMarche Clone Group and your industry peers. We then examine the opportunities for improving your liquidity and offer proactive recommendations.