Market liquidity is essential for smooth trading activities from "summary" of Financial Markets and Institutions, Global Edition by Frederic S. Mishkin,Stanley G. Eakins
Market liquidity refers to the ease with which assets can be bought or sold in the market without causing a significant change in their price. It is a crucial factor in ensuring smooth trading activities in financial markets. When markets are liquid, investors can quickly and easily buy or sell assets, which helps to ensure that prices are fair and reflect the true value of the assets. The presence of market liquidity also helps to reduce transaction costs, as investors do not have to worry about large price movements when buying or selling assets. This can encourage more trading activity and increase ma...
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