liquidity

Liquidity

1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.

2. The ability to convert an asset to cash quickly.

Notes:

1. It is safer to invest in liquid assets than illiquid ones because it is easier for you to get your money out of the investment.

2. Examples of assets that are easily converted into cash include blue chip and money market securities. Also known as "marketability".

See also: Asset, Blue Chip, Cash, Illiquid, Liquidity Cushion, Liquidity Risk, Money Market, Short Squeeze, Volume

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Liquidity

A high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease. Antithesis of illiquidity.

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liquidity

A large position in cash or in assets that are easily convertible to cash. High liquidity produces flexibility for a firm or an investor in a low-risk position, but it also tends to decrease profitability.