Sample interview questions: How do you assess the liquidity of different markets when investing globally?
Sample answer:
Assessing Liquidity in Global Markets
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Historical Trading Volume and Market Depth: Analyze historical trading volumes and bid-ask spreads to gauge the availability and depth of the market. High trading volumes and narrow spreads indicate liquidity.
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Market Size and Concentration: The size of the market, measured by market capitalization or trading value, often correlates with liquidity. Larger markets tend to be more liquid. Additionally, markets with a high concentration of participants, such as institutional investors, enhance liquidity.
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Market Regulations and Infrastructure: Strict regulations and transparent trading systems generally foster liquidity. Look for markets with robust clearing and settlement mechanisms, as well as reliable market surveillance.
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Market Volatility and Correlation: High volatility and low correlation with other markets can impact liquidity. In volatile markets, liquidity can evaporate quickly, while low correlation can provide diversification benefits.
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Political and Economic Stability: Political and ec… Read full answer