Liquidity refers to the ease of converting an asset to cash. Highly liquid assets like large-cap stocks trade frequently with narrow bid-ask spreads. Illiquid assets may be difficult to sell quickly without accepting a lower price. Liquidity risk is especially important during market stress when buyers become scarce.
Key Takeaways
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Quick Reference
Category
trading
Difficulty
Beginner
Reading Time
1 min
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Where You'll See This
This concept appears throughout stock detail pages and financial data.