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International Finance - Assignment Example

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The main objective is to determine the type of interaction or relationship between these two variables. It is very important to understand how market liquidity and…
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International Finance
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Download file to see previous pages The dataset includes information about stock return, return on equity, and return on assets, total bank assets and amihud index.
The data set used in this study is related to several banks that do operate in various parts of the world and this enabled the understanding of the interaction of these two variables that include funding liquidity and market liquidity risk. Firstly correlation analysis was undertaken between certificate of deposits for banks (funding liquidity risk) and Amihud index (market liquidity risk).Regression analysis was as well undertaken between these two variables. In addition, for further studies, a regression analysis could be performed between the dependent variable which was certificates of deposit and the independent variables that include, total asset, stock returns, Amihud index and return on assets.
Literature on the interaction between the funding liquidity risk and market liquidity risk was searched on internet through Google. Important journals related to the topic were selected and summarized. The key words such as measurement of market liquidity risk and funding liquidity risk; the relationship between market liquidity risk and funding liquidity risk were used when searching the literature online.
The below results from correlation analysis indicate that there is a positive correlation between the market liquidity risk and the funding liquidity risk during the given period. The positive correlation is indicated by 0.08 as the coefficient value between these two variables. It is also seen that the correlation between these two variables is significant since the p value is less than 0.05.The variable of market liquidity and funding liquidity have been represented by Amihud index and the volume of assets.
Basing on the regression analysis results below where, Amihud index was taken as dependent variable and the certificates of deposit represented independent variable. ...Download file to see next pagesRead More
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