Assessment of Stock Market Liquidity and Efficiency: Evidence from an Emerging Country

The study examines the market efficiency, multi-dimensions of liquidity, and their intercon-nectedness in the emerging Indian stock market. In contrast to the existing literature, the current study aims to fill the gap by testing market liquidity considering multi-dimensions such as depth, breadth, immediacy, tightness, and resilience. Second, the study used a battery of tests to determine efficiency, in-cluding the Ljung and Box, the runs test, the Bartels test, Variance Ratio, and the BDS tests. To the best of the authors' knowledge, this is also the primary study to assess how market efficiency and liquidity are related in the Indian equity market. The results of the study show that during the pandemic, the Indian stock market was proven to be efficient, suggesting that there are no abnormal returns. Moreover, the research demonstrates that during the COVID-19 pandemic, large volumes of securities were traded quickly and at a lower price effect, but with higher trading costs for completing a market transaction. However, it is worth noting that increased liquidity equates to greater efficiency, while lower liquidity equates to inefficiency. The study has underlined the most significant implications for policymakers, market regulators, investors and other stakeholders who are monitoring the asset allocations and risk management.