Selling difficulty / Liquidity

This section provides information on the asset liquidity, i.e., how easy and quickly an investor can sell the position in the asset for cash at a price very close to that currently prevailing in the market, at any time and in any market condition. The metrics used for ranking are absolute and relative trading volumes measured at different percentiles of the historical distribution, absolute and relative volatility of trading volumes, numerical effect of stress market conditions on liquidity and stability of trading volumes. The lowest score of 1 out of 7 means that the asset ranks in the lowest liquidity risk bucket relative to its peers, i.e., an investor is very likely to be able to quickly sell a sizeable position in the asset almost immediately, without any material effect on the prevailing market price even both under normal and stress market conditions.

For bonds, we tend to rely more on metrics such as bid-ask spreads, price changes, and amount outstanding due to OTC nature and much poorer reporting.