Equities - Relative Liquidity

Now that we’ve outlined the four main building blocks of finance, it’s time to dive deeper into the four asset classes to better understand how they function. One important factor that is ubiquitous across all four asset classes is liquidity and the differences in relative liquidity between individual assets and markets. Here we break down relative liquidity in equity markets by explaining just how much larger and more liquid some markets are than others. This relative liquidity metric is a great proxy for systematic importance, and keeping track of this data can help improve your understanding of what moves in individual markets might mean for other asset classes and how those movements can be used as economic indicators.