Stock Jobs Stock Market Liquidity 3

Question 1

Market depth refers to what?

Accepted Answer

The volume of orders available at various price levels

Answer

Market depth shows how many shares can be traded at each price before moving the market.

Question 2

A large order that pushes a stock's price significantly is said to have caused what?

Accepted Answer

Market impact

Answer

Market impact is the adverse price movement caused by executing a large trade.

Question 3

Which type of order tends to provide liquidity rather than consume it?

Accepted Answer

A limit order resting in the book

Answer

Resting limit orders add depth to the order book, supplying liquidity for others.

Question 4

Liquidity tends to be highest during which part of the U.S. trading day?

Accepted Answer

The open and the close

Answer

Trading volume and liquidity typically peak near the market open and close.

Question 5

An ETF's liquidity is influenced not only by its own volume but also by what?

Accepted Answer

The liquidity of its underlying holdings

Answer

ETFs can be created or redeemed using underlying assets, so their liquidity reflects those holdings.

Stock Jobs Practice Test