A measure of stock liquidity determined by dividing the total number of shares traded over a period by the average number of shares outstanding for the period is share turnover. Thus, the higher the share turnover, the more liquid company shares are.
Understanding Share Turnover
Based on investopedia, Share turnover ratio suggests how easy, or difficult, it is to sell shares of a particular stock on the market. It compares the number of shares that change hands during a particular period. And with the total number of shares that could have been traded during that same period.
Investors may be reluctant to put their money at risk by gaining the shares of a company with low share turnover. Hence, it is interesting as a measure because the correlations do not always hold up.
Investors frequently think that smaller companies will see less share turnover because they are, in theory, less liquid than large companies. However, these companies often see a greater portion of thi share compared to large companies.
Part of this is pricing. Some large companies have share prices in the hundreds of dollars. Although their huge floats mean hundreds of thousands of shares can trade a day, the actual percentage of the total outstanding is small.
On the other hand, smaller companies usually have correspondingly cheaper shares. So the opportunity cost of loading up and unloading is depending on something. It based on the growth prospects is smaller in terms of capital commitment. One reason companies split their stock is to try to keep their shares affordable and therefore more liquid.
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