Market tightness is a measure of the liquidity of a market.[1] High market tightness indicates relatively low liquidity and high transaction costs, whereas low market tightness indicates high liquidity and low transaction costs.[2] For example, during the dotcom bubble, information technology companies were very difficult and expensive to buy a part of, through stock, loan, or other methods, due to the tightness of competition in the market.

Equity markets

In equity markets, market tightness is measured using percentage relative spread.[3][2]

Housing markets

In housing markets, measures of market tightness include the probability of achieving a sale and house price appreciation. Tighter housing markets result in greater seller bargaining power and higher sale prices.[4]

Labour markets

Labour market tightness is measured as the ratio of job vacancies per unemployed person or jobseeker.[5]

References

  1. ↑ "market tightness". United Nations Economic and Social Commission for Western Asia. 17 July 2017. Retrieved 30 May 2021.
  2. 1 2 Olbrys, J.; Mursztyn, M. (2019). "Depth, tightness and resiliency as market liquidity dimensions: evidence from the Polish stock market". International Journal of Computational Economics and Econometrics. 9 (4): 308–326. doi:10.1504/IJCEE.2019.102513.
  3. ↑ Olbrys, J. (2020). "Market Tightness on the CEE Emerging Stock Exchanges in the Context of the Non-trading Problem". Advances in Cross-Section Data Methods in Applied Economic Research. Springer Proceedings in Business and Economics. Springer. pp. 553–569. doi:10.1007/978-3-030-38253-7_36. ISBN 978-3-030-38252-0. S2CID 212801466.
  4. ↑ Carrillo, P.E.; de Wit, E.R.; Larson, W. (2015). "Can tightness in the housing market help predict subsequent home price appreciation? Evidence from the United States and the Netherlands" (PDF). Real Estate Economics. 43 (3): 609–651. doi:10.1111/1540-6229.12082. S2CID 155561559.
  5. ↑ de Pedraza, P.; Guzi, M.; Tijdens, K. (2020). "Life satisfaction of employees, labour market tightness and matching efficiency" (PDF). International Journal of Manpower.
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