Examining Market Quality on the Egyptian Exchange (EGX): An Intraday Liquidity Analysis

Abstract

This study examines the intraday dynamics of liquidity and trading activity on the Egyptian Exchange (EGX) to assess its market quality. Using reconstructed five-minute limit order book data, this study measures liquidity dimensions and explores anomalies through interval-of-day and day-of-week models. Key findings reveal an inverted J-shaped pattern in spreads due to information asymmetry, a U-shaped pattern in total depth, and a J-shaped market depth pattern. Additionally, significant day-of-week effects are observed, with Sundays showing the lowest liquidity and Thursdays the highest trading activity. These patterns highlight the impact of the EGX’s unique microstructure, including tick sizes and a preference for limit orders. This study underscores the influence of market structure on liquidity, trading efficiency, and cost, emphasizing the need for tailored regulatory and trading strategies. It provides valuable insights for investors optimizing trading strategies and policymakers seeking to enhance market integrity. Concluding, this research offers a foundation for understanding intraday liquidity patterns in emerging markets like the EGX and proposes future exploration of how information flows and trading mechanisms affect price discovery and market efficiency.