7.2.3 Investment characteristics: liquidity

Liquidity is the ability to cash in or sell an investment quickly at or near the current market price.

Liquidity affects the value of an investment. You expect to receive a higher return if you give up the ability to cash in your investment quickly. Highly liquid investments therefore can charge a higher price than similar investments that are less liquid. For example, stocks in a company that are traded on a public exchange might cost more than stocks in a similar company that are not traded publicly, because you can easily re-sell the publicly traded stocks.

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