An important difference between emerging and developed markets is the speed at which investors are able to get in and out of their investments, thus convert their assets into purchasing power at agreed prices (Levine, 1997). Emerging equity markets are often less liquid than developed markets, although they can vary considerably in their liquidity. As mentioned before, less developed stock markets have less market capitalization, lower trading volume and are more concentrated. These factors make it more difficult for investors to make large trades without changing the stock price and to buy or sell large quantities of stocks because less seller and buyers are available in the market. According to Levine (1997) high trading costs can also be detrimental for liquidity.
