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<p>In this paper, we investigate whether measuring stock liquidity based on an ordered fuzzy numbers representation of a limit order book allows investors to develop a profitable investment strategy. To this end, we examine the data from 259 companies listed on the Warsaw Stock Exchange between January 2014 and December 2021. We apply several methods commonly used in asset pricing studies to obtain baseline results. These were then supplemented with a series of robustness checks. Our strategy which employs a liquidity measure based on ordered fuzzy numbers generates a weekly return of 0.184% (0.199%) for equal- (value-) weighted portfolios, which translates into an annual return of 9.568% (10.348%). This return remains positive after adjusting for risk and considering trading costs and short-sales restrictions. The strategy outperforms the market buy-and-hold strategy, generating a Sharpe ratio several times higher. These results are useful for investors and portfolio managers, as they may assist them in refining their investment strategies.</p>

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Can Investors Profit from Measuring Stock Liquidity with Ordered Fuzzy Numbers?

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2025年9月19日

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  • Szymon Stereńczak,
  • Adam Marszałek

摘要

In this paper, we investigate whether measuring stock liquidity based on an ordered fuzzy numbers representation of a limit order book allows investors to develop a profitable investment strategy. To this end, we examine the data from 259 companies listed on the Warsaw Stock Exchange between January 2014 and December 2021. We apply several methods commonly used in asset pricing studies to obtain baseline results. These were then supplemented with a series of robustness checks. Our strategy which employs a liquidity measure based on ordered fuzzy numbers generates a weekly return of 0.184% (0.199%) for equal- (value-) weighted portfolios, which translates into an annual return of 9.568% (10.348%). This return remains positive after adjusting for risk and considering trading costs and short-sales restrictions. The strategy outperforms the market buy-and-hold strategy, generating a Sharpe ratio several times higher. These results are useful for investors and portfolio managers, as they may assist them in refining their investment strategies.