Market Liquidity

Market Liquidity actually refers to how easily a security, or investment, can be sold and converted to cash without having much impact on the value or price. It is about how big the trade-off is between the speed of the sale and the price it can be sold for. It is also related to liquidity risk, which involves the possibility that a security cannot be easily sold. It can be influenced by the amount of trading activity associated with the security, as well as other factors like bond rating, maturity date, and the existence of a sinking fund. Foreign investments have varying degrees of liquidity because of laws that govern the redemption of shares from other countries.