The Liquidity Crunch Impact on Stock Selection: Case from Baltic Equity Market

摘要

Liquidity crisis, which hurt global equity market, affected also emerging Baltic stock market. The paper provides a case study of the approach to stock selection on Baltic equity market during the liquidity crunch with primary attention paid to the financing structure of the companies. The findings of the research do not provide a clear answer whether investors value more those companies with higher share of equity capital. However, it becomes clear that the stocks with sufficient equity capital for operating business are performing best particularly during the liquidity crisis when it becomes harder to attract external financing. The results of the study show also the classical case when the utilities and consumer non-cyclical companies are leaders performance wise, while financials and consumer cyclical suffer the most. It has also been proved that larger and liquid (high daily turnover) companies demonstrate better performance than smaller illiquid companies.