Reading the Illiquidity Chart

The main chart shows historical illiquidity as a time series. Here's how to interpret it:

• Historical Illiquidity Levels

  The Y-axis shows the ILLIQ measure. Higher values mean trading is more expensive. Look at where current levels sit relative to historical peaks and averages.

• Forecast Horizon Indicators

  The header displays predictions for 1 day, 1 week, and 1 month. Compare these to understand expected direction of trading costs.

• Stress Period Identification

  Look for spikes during market stress events (2008, 2011, 2015, 2020). These show how illiquidity behaves during crises for this security.

Understanding Market Impact

Market impact is the price movement caused by your own trading. ILLIQ helps estimate this cost:

• Price Impact Magnitude

  Higher ILLIQ values mean each dollar traded moves prices more. Large trades in high-ILLIQ securities can significantly move the market against you.

• Volume Sensitivity

  ILLIQ measures price movement per dollar volume. Days with low volume typically show higher illiquidity—trading is more expensive.

• Timing Considerations

  If forecasts show elevated illiquidity persisting, consider delaying large trades. Short-term forecasts are more reliable than long-term ones.

Illiquidity Prediction Display

The header displays multiple forecast horizons as metric tablets, showing illiquidity predictions for different time frames:

• 1 Day

  Next trading day's predicted illiquidity (Amihud measure), with the change from the previous day's forecast shown in a colored chip

• 1 Week

  Predicted average illiquidity over the next 5 trading days, with the change from the 1-day prediction

• 1 Month

  Predicted average illiquidity over the next 22 trading days, with the change from the 1-day prediction

Summary Table Columns

The table below the chart shows these values for the current date:

• Price

  Most recent closing price for the security.

• Return

  Daily return (percentage change from previous close).

• Avg Week ILLIQ

  Average illiquidity over the past week (5 trading days). Shows current short-term trading cost level.

• Avg Month ILLIQ

  Average illiquidity over the past month (22 trading days). Shows recent trading cost environment.

• Min ILLIQ

  Minimum illiquidity observed over the full estimation period. Represents best-case historical trading conditions.

• Max ILLIQ

  Maximum illiquidity observed over the full estimation period. Represents worst-case historical trading conditions.

• Avg ILLIQ

  Average illiquidity over the full estimation period. The long-term baseline for trading costs.

• Vol of ILLIQ

  How much illiquidity fluctuates over time. Higher values mean trading costs are less predictable.

• 1 Week Pred

  Predicted average illiquidity over the next week. Most reliable short-term forecast.

• 1 Month Pred

  Predicted average illiquidity over the next month. Shows expected medium-term trend.

• 6 Month Pred

  Predicted average illiquidity over the next six months. Tends toward long-term average.

• 1 Year Pred

  Predicted average illiquidity over the next year. Converges to long-term equilibrium level.

Plot Options

The chart menu provides tools to customize the visualization and analyze patterns:

• Date Range

  Click 6M, 1Y, 2Y, 5Y, 10Y, or ALL to quickly change the chart time range. Use the calendar picker for custom date ranges.

• Moving Window

  Adjust the moving average window to smooth short-term fluctuations and see underlying trends more clearly.

• Compare

  Add the ILLIQ Composite (market-wide) or other securities to contextualize whether illiquidity is security-specific or market-wide.

• Subplot

  Add a subplot showing Daily Returns, Daily Prices, or Both below the main chart. Helps correlate illiquidity with price movements.

• Line Style

  Change the appearance of the plotted lines—solid, dashed, or with markers at data points.

• Legend Position

  Move the legend to different positions on the chart for better visibility when multiple series are plotted.

The chart and table help you understand this security's trading cost patterns and what to expect:

Liquidity Regime Analysis

Illiquidity tends to persist in regimes. Identifying the current regime helps set expectations:

• High Liquidity Regime

  Low ILLIQ values (near historical minimums). Trading costs are low, large orders can be executed with minimal market impact. Typically occurs during calm, high-volume periods.

• Normal Liquidity Regime

  ILLIQ near historical average. Standard trading conditions. Plan trades assuming typical market impact costs.

• Liquidity Stress Regime

  ILLIQ elevated above historical average, approaching peaks. Trading is expensive. Consider breaking large orders into smaller pieces or waiting for conditions to improve.

Illiquidity is calculated using the Amihud (2002) measure and modeled using GARCH-type specifications to capture time-varying patterns and forecast future trading costs.

Methodology

The model uses an autoregressive specification to capture illiquidity persistence. Daily ILLIQ values are computed from returns and volume, then modeled to generate multi-horizon forecasts. The model re-estimates daily with new data.

Common Questions

Why do ILLIQ values vary so much across different assets?

ILLIQ scales with market cap and trading activity. Large-cap stocks with high volume show low values (1-100). Mid-caps range 100-1,000. Small-caps can exceed 1,000, with very small stocks reaching 4,000+. Always compare to similar securities.

What do very high illiquidity values indicate?

Extremely high ILLIQ (relative to the security's history) indicates stressed liquidity conditions. Trading is expensive and large orders will significantly impact prices. This often occurs during market crises or security-specific events.

Why did illiquidity suddenly spike?

Illiquidity spikes when volume drops or volatility increases. Common causes: earnings announcements, market stress events, sector-specific news, or broader market sell-offs. Check the subplot showing returns to correlate with price movements.

Understanding the Data

Common questions about interpreting what you see:

How should I interpret extreme ILLIQ values?

Compare to the security's own Min/Max/Avg history in the summary table. If current ILLIQ is near Max, liquidity is stressed. If near Min, conditions are favorable. The historical range provides context for what's normal for this security.

Are there market microstructure effects in the data?

Yes. ILLIQ can show patterns around market open/close, dividend dates, and index rebalancing days. For most users, these short-term effects average out. Focus on multi-day trends rather than single-day values.

Why are some securities persistently more illiquid than others?

Persistent illiquidity reflects structural factors: market cap, institutional ownership, analyst coverage, exchange listing, and sector characteristics. These don't change quickly, so cross-security differences are fairly stable.

How should I adjust trading strategies based on ILLIQ?

In high-ILLIQ environments: use limit orders, break large orders into smaller pieces, spread execution over time, and consider passive (VWAP/TWAP) algorithms. In low-ILLIQ environments: market orders become more viable for urgency.

How do I download the data?

Click the Download menu above the chart and select 'Download Data'. You must be logged in with a V-Lab account. Data exports as a CSV file with daily ILLIQ values and forecasts.

Here's how to quickly analyze illiquidity for a security:

Before Large Trades

Before executing large trades, check current illiquidity against historical levels. If near historical highs, expect greater price impact. Consider breaking orders into smaller pieces, using limit orders, or waiting if forecasts show improvement. Use the Compare feature to see if conditions are market-wide.