IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES

Sukanya Chatterjee; Sarbapriya Ray

doi:10.17261/Pressacademia.2026.2042

IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES

Abstract

Purpose- The present study tries to judge the impact of liquidity on stock return in two select Indian companies listed in Bombay Stock Exchange (BSE) by making use of a restructured stock market dataset and financial data for the period from 1 January 2008 to 31March 2025. Methodology-The study is solely based on secondary daily, monthly, and annual stock market data collected from BSE India. Actual returns calculated using the log difference of previous price and current price Rt= Ln (Pt-Pt-1), where P is the price, Ln is natural logarithm and t is the period and Rt is Actual Return. Amihud (2002) measure of illiquidity is applied to arrive at stock illiquidity, single index model (SIM) is used to compute market risk. Several econometric tools like unit root test such as ADF test, PP test, granger causality test, robustness test like multicollinearity, serial correlation (Breusis usedy test), heteroscedasticity test (Breusch-Pagan-Godfrey Test), normality of error terms (Jarque-Bera Test), Ramsey Reset test etc applied. Finally, generalized method of moment has been applied to judge the impact of illiquidity on stock return on select conglomerates. Findings- The results suggest that the impact of illiquidity on stock returns is diverse in case of select conglomerate industries listed in Indian stock market. More precisely, we observe a reliable positive impact of illiquidity on stock returns in Reliance industry and insignificant negative impact of illiquidity on stock returns in Adani industry. However, we do not find any granger causal connection between fluctuation in liquidity and stock returns in both Indian conglomerate industries. Stock’s systematic risk has an insignificant positive effect on stock returns in case of both industries indicating a direct, risk-reward relationship, although existence of insignificantly positive effects. Conclusion- This research study on the nexus between illiquidity and stock return might be viewed as an effort towards understanding stock return, illiquidity, volatility dynamics in the emerging economy like India.

Keywords

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Details

Primary Language

English

Subjects

Finance

Journal Section

Research Article

Authors

Sukanya Chatterjee ^* This is me
0009-0000-7040-0550
India

Sarbapriya Ray This is me
0000-0002-5848-4824
India

Publication Date

June 30, 2026

Submission Date

February 24, 2026

Acceptance Date

June 13, 2026

Published in Issue

Year 2026 Volume: 13 Number: 1

DOI

https://doi.org/10.17261/Pressacademia.2026.2042

IZ

https://izlik.org/JA26YA62TC

Cite

RIS / Bibtex

APA

Chatterjee, S., & Ray, S. (2026). IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES. Journal of Economics Finance and Accounting, 13(1), 50-66. https://doi.org/10.17261/Pressacademia.2026.2042

AMA

1.Chatterjee S, Ray S. IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES. JEFA. 2026;13(1):50-66. doi:10.17261/Pressacademia.2026.2042

Chicago

Chatterjee, Sukanya, and Sarbapriya Ray. 2026. “IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES”. Journal of Economics Finance and Accounting 13 (1): 50-66. https://doi.org/10.17261/Pressacademia.2026.2042.

EndNote

Chatterjee S, Ray S (June 1, 2026) IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES. Journal of Economics Finance and Accounting 13 1 50–66.

IEEE

[1]S. Chatterjee and S. Ray, “IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES”, JEFA, vol. 13, no. 1, pp. 50–66, June 2026, doi: 10.17261/Pressacademia.2026.2042.

ISNAD

Chatterjee, Sukanya - Ray, Sarbapriya. “IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES”. Journal of Economics Finance and Accounting 13/1 (June 1, 2026): 50-66. https://doi.org/10.17261/Pressacademia.2026.2042.

JAMA

1.Chatterjee S, Ray S. IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES. JEFA. 2026;13:50–66.

MLA

Chatterjee, Sukanya, and Sarbapriya Ray. “IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES”. Journal of Economics Finance and Accounting, vol. 13, no. 1, June 2026, pp. 50-66, doi:10.17261/Pressacademia.2026.2042.

Vancouver

1.Sukanya Chatterjee, Sarbapriya Ray. IMPACT OF LIQUIDITY ON STOCK RETURNS: EVIDENCE FROM SELECTED INDIAN COMPANIES. JEFA. 2026 Jun. 1;13(1):50-66. doi:10.17261/Pressacademia.2026.2042