Is Copenhagen’s Liquidity Frozen? First North Liquidity Comparison in Copenhagen vs. Stockholm

Rares Cátálin Bagyo

Student thesis: Master thesis

Abstract

Looking at the number of companies listed in Copenhagen First North and in Stockholm First North
we can see a big discrepancy. In March 2017, 8 companies are listed in Copenhagen while Stockholm
has 227. Nine of those companies are Danish companies that chose to get listed in Sweden instead of
Denmark. Finding out why the difference is so big requires a very comprehensive analysis and this
paper takes one piece of it by focusing on the market liquidity. The main question that this study
raises is whether there is a significant difference in liquidity between Copenhagen First North and
Stockholm First North. The research goes one step further and includes, as a separate sample, the
Danish companies listed in Stockholm and challenges the correlation and causality between all three
datasets. Liquidity, as a concept, is elusive and can be discussed from many angles but this paper
calculates it in two ways: relative spread and ILLIQ from Amihud (2002).
The results of this paper confirm that Copenhagen’s market liquidity is significantly lower than
Stockholm’s. The Danish companies listed in Sweden also have a significantly higher liquidity than
the ones listed in Copenhagen. Moreover, the econometric analysis concludes that the liquidity of
those Danish companies listed in Stockholm is directly influenced and Granger caused by the market
liquidity in Stockholm and Copenhagen. Using a panel data methodology, we find out that market
liquidity in Copenhagen is expressed and Granger caused by the market liquidity in Stockholm. The
relationship is bi-directional but at a lower significance level (p-value).
The paper concludes based on the research question that Copenhagen’s market liquidity is
significantly lower than Stockholm’s and it is correlated and Granger caused by it. The Danish
companies listed in Stockholm are influenced by both markets but Sweden has a greater impact.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages98