Leading Indicators of Returns
Illiquid stocks outperform when there is an improvement in market illiquidity. A long/short liquidity trading strategy using Russell 2000 and DJIA ETFs, significantly outperforms comparable benchmarks.
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Risk Management Tool
Orissa Group's liquidity analytics will enable institutions and investment managers to understand and manage the liquidity risk exposures of their investment portfolios and corporate balance sheets.

The market’s liquidity fundamentals have stabilized over the past six months, as indicated by Orissa Group’s (OGI) Market Illiquidity Level (MIL). MIL measures the illiquidity level aggregated for the entire market. MIL has dropped below a 6-year high registered during the week of Oct 10, 2008.

Illiquid securities had underperformed liquid securities by 13% between October 1 2008 and Mar 11 2008, as measured by OGI’s Market Illiquidity Factor (MIF), despite the improving liquidity fundamentals. Therefore, we made the call in our liquidity report dated March 16th, that we expect illiquids to outperform. Since then illiquid securities have outperformed liquids by over 20%. In our Liquidity Report (dated June 8th) we reversed our position, and reported that illiquid securities are due for a correction and may be expected to under perform in the short-medium term. This was influenced by the observation that outperformance of illiquid securities was excessive compared to historical Liquidity Improving Regimes. However surprisingly illiquids rallied quite strongly and MIF registered an all time high on Sep 28, 2009. Since then, illiquids have lost some luster and have lost a little over 3% compared to the liquids.

Download Dec 07, 2009 Liquidity Report